Inheritance - Is Bexley Borough Property still the best place for my windfall?

A few weeks ago, I received an interesting email from someone in Bexley Borough that, with the sender’s permission, I am going to share with you.

The gentleman in question lives in Upper Belvedere. He is in his mid-60s and still working. He has a decent pension, so when he retires in a few years he will have a comfortable lifestyle. Recently, he inherited £240,000 from an elderly aunt. If he puts it into a savings account, the best deal available is a two-year bond with the Post Office which pays 1.9%, meaning that he would get £4,560 in interest a year. Another option is to buy a local property to rent out. He wanted my advice on what to buy, mentioning that he did not want to take a mortgage out at his time of life, and that he was concerned about the implications of the tax changes for landlords that he had read about.

Notwithstanding the war on landlords being waged by George Osborne, for many the attraction of bricks and mortar endures. As this gentleman 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 landlords. While he would face an extra 3% in stamp duty to buy a second property, with some good negotiation techniques that could soon be mitigated.

My advice was that buying a local buy-to-let property is all about the total return on investment. The average yield (the equivalent of the interest rate on the property) in Bexley Borough at the moment is 4.18% per annum. This means that our potential F.T.L (First Time Landlord) should be able to earn £10,032 a year before costs, depending on what he buys. I also told him that there are plenty of landlords in the Borough earning half as much again (if not more), if they are willing to consider more specialist investment types of property. (If you want to know where, look at my blog or drop me an email).

The success of investing in Bexley Borough buy-to-let property versus a savings account with the Post Office (or whichever 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 invest can also go up (and yes, it can go down as well – more of that shortly). Local property values have risen in the last twelve months by at least 4.18%. This means that if the gentleman in question had bought a year ago, not only would he have received the £10,032 in rent, but he would have seen an uplift of £29,520, so his overall return for the year would have been £39,951 (not bad when compared to the Post Office!).

Doom-mongers will point out that property values can also go down, as they did in 2008, and in 1988 and 1979. That’s true, but prices had bounced back to their ’79 levels by 1984 and went on to grow an additional 58% in the following four years. When they dropped in 1988, they took 13 years to reach 1988 figures, but the following six years (between 2001 and 2007) they increased by an additional 66%.

According to the Land Registry, average property values in Bexley currently stand 26.99% above the January 2008 level. Anecdotal evidence suggests that they are considerably higher in the nicer areas. Therefore, all this talk of property crashes is overblown.

So, what would that £240,000 get you locally? Well, you could buy an immaculate 2 bed apartment on Chichester Wharf, a lovely 2-bed apartment in the Old Baths development or a charming 2-bed apartment on Bexley Road. In fact, the world is your oyster!

But which oyster is the one for you? Well, my blog-reading friends, if you want to read similar articles like this and learn more about what I consider to be the very best buy-to-let deals in Bexley Borough, regardless of which agent is selling it, you need to visit the Bexley Borough Property Blog  www.bexleyproperty.co.uk, call us on 01322 559955, or even pop in for a chat. Our office is located in the heart of Bexley Village (next to the King’s Head Public House).