I had an interesting email from someone in Maidenhead a few
weeks ago that I want to share with you (don’t worry I asked his permission to
share this with you all). In a nutshell, the gentleman lives in Holyport, he is
in his mid 60’s and still working. He has a decent pension, so that when he
does retire in a couple of years’ time, it will give him a comfortable life. He
had recently inherited £405,000 from an elderly relative. One option he told me was
put it into a savings account. The best he could find was a 2 year bond with
the Post Office which paid 1.9%; meaning he would get £7,695 in interest a
year. One of his other options was to buy a property in Maidenhead to rent out
and he wanted to know my thoughts on what he should buy, but he had concerns as
he didn’t want to take a mortgage out at his time of life. He was also worried
about all the tax changes he had read about in the papers for landlords.
Notwithstanding the war on Maidenhead landlords being waged
by George Osborne, the attraction of bricks and mortar endures for many. As our
man is a cash buyer, he would not have to deal with the intricate cut to
mortgage interest tax relief that will diminish, or even eradicate, the profits
of many Maidenhead landlords. It’s true he would face the extra 3% in stamp
duty to buy a second property, but as I have explained in recent articles this could be mitigated to some extent....
I told him that buying a Maidenhead buy to let property is
all about the total return on investment. True, he could put the money in the
Post Office bond and receive his interest of £7,695 a year or, as he rightly
suggested, invest in property in Maidenhead. The average yield (yield being the
equivalent of the interest rate on the property) at the moment in Maidenhead is
3.05% per annum, meaning our potential F.T.L (First Time Landlord) should be
able to, depending on what he bought in the town, earn before costs £12,352 a
year. (However, I told him there are plenty of landlords in Maidenhead earning
half as much again (if not more), if he was willing to consider more specialist
investment types of properties – again, if you want to know where – look at my blog
or drop me an email).
The bottom line is that the success of investing in Maidenhead
buy to let property versus a savings account with the Post Office (or whatever
Bank or Building Society is offering the best rate) will depend on the
performance of those assets. Unlike with a savings account, with property the
capital you invested can also go up (and yes, it can go down as well – more of
that in second). Property values in Maidenhead have risen in the last twelve
months by 10.8% meaning, that if our chap had bought a year ago, not only would
he have received the £12,352 in rent, but also seen an uplift of £43,740
…meaning his overall return for the year would have been £56,092 (not bad when
compared to the Post Office!).
.. but the doom mongers
amongst you will say, property values can go down, as they did in 2008, and in
1988 and 1979. Yes, but after 1979 prices had bounced back to their ’79 levels
by 1984 and went on to grow an additional 58% in the following four years. Then
again, they dropped in 1988 and did take 13 years to reach back to those ’88
figures, but the following six years (between 2001 and 2007) they then
increased by an additional 66%. Now, according to the Land Registry, average
property values in Windsor and Maidenhead currently stand 26.4% above the
January 2008 level, and anicdotal evidence suggests that in the nicer parts of Maidenhead,
we are well above these sorts of levels. Therefore, all this talk of property
crashes is unfounded.
… and what would that £405,000 get you in Maidenhead? A decent
2 bed terrace in Grenfell Road area, a really nice 3 bed end terrace in the
Courthouse area or a superb 3 bed terrace / flat close to the town centre and
the River Thames .. in fact, the world is your oyster. But which Oyster? Well,
my blog reading friends, if you want to read similar articles like this and
what I consider to be the very best of buy to let deals in Maidenhead,
irrespective of which agent is selling it, then you need to visit the Maidenhead
Property Blog
