Flats make rubbish B2Ls. Discuss.

[b0redom]

Hi All,
I've never really understood why people do B2L on a flat, or even buy them. It seems to me that you buy a lease on something for around the same price as a house, and then the clock starts ticking until the freeholder gets it back. You also have to pay ground rent and maintenance which also come out of the gross rental income.

I'm in the market for a 2nd B2L, but the market seems to have gone mental, so I either stump up a massive bunch of cash for a 1 bedroom house, or slightly less for a flat.

Am I missing something? Do B2L flats have any upside I'm missing?

[b0redom]

Seriously? Nearly 60 views and not a single reply? Are all of you lot really Walter Mitty types? I thought loads of you had a B2L property empire?

[northernladuk]

I would go with many of these points but I had a flat for 10 years. The rent covered all these costs and I was in for the long term, not monthly profit. It was also a converted mill out in the county side so quite desirable and not many houses. Had some good long term tenants that 'lived' there so looked after it. Getting a flat in a new build in a city brings a whole host of different pro's and con's.

Must admit I wouldn't do it again though. Rather stump up a little more for a 2 bed house but again would keep out of the way of cities and short term tenants.

Flats can be good for students though, high demand, guaranteed(ish) payments with good rent but all the hassle of tulip tenants and so on. Depends on your letting strategy. Hard work for the returns or a nice long hassle free approach.

[DirtyDog]

The people that I know who do it on a reasonable scale all steer clear of flats and go for houses.

Big houses in nicer student areas are always good value, eg. Leamington Spa.

[Goatfell]

Hi All,
I've never really understood why people do B2L on a flat, or even buy them. It seems to me that you buy a lease on something for around the same price as a house, and then the clock starts ticking until the freeholder gets it back. You also have to pay ground rent and maintenance which also come out of the gross rental income.

Much of it depends on the sector of the rental market you're aiming for. As houses usually cost more (see below), so the rental value is more expensive. Many singles or young couples don't want the hassle of maintaining a garden and neither do they want to stump up for garden maintenance. A young family are more likely to want private/secure gardens for little'uns but again the rents are greater so your segment is smaller.
Quite agree with your comments regarding leasehold, it doesn't seem to make sense to me so I don't buy them either.

so I either stump up a massive bunch of cash for a 1 bedroom house, or slightly less for a flat.

It'll very much depend on the area you're looking at, if there isn't much of a premium on houses go for one (DYOR on the rental potential though, that's maybe why flats are relatively expensive in that area).
All you can really do is calculate your yield, add on estimated capital gain and compare the figures for both over your time frame.

[northernladuk]

It'll very much depend on the area you're looking at, if there isn't much of a premium on houses go for one (DYOR on the rental potential though, that's maybe why flats are relatively expensive in that area).
All you can really do is calculate your yield, add on estimated capital gain and compare the figures for both over your time frame.

I do have a pretty good spreadsheet I found that allows you to put in all the costs to buy, income (with factor for empty property) and estimated percentage raise in sale price in x years and it gives an ROI on the property. I will see if I can find it on the web and link it.

The problem I have in my area is that the rents don't go up in line with the cost of the house. Anything over a 2 bed terraced does not command enough rent to cover the mortgage. I am sure this is not true for cheaper properties in busy town areas but in desirable out of town areas the market for 3/4 bed family homes means they are just not priced for letting. That is unless you are happy to put a bigger deposit in to bring the mortgage down but if you were going to do that you would probably just get 2 cheaper ones and both rents cover each of the costs. That means flats become an option even though they aren't the best.

[Goatfell]

I do have a pretty good spreadsheet I found that allows you to put in all the costs to buy, income (with factor for empty property) and estimated percentage raise in sale price in x years and it gives an ROI on the property. I will see if I can find it on the web and link it.

That would be much appreciated.

The problem I have in my area is that the rents don't go up in line with the cost of the house.

Exactly, in the area I'm involved the break-even point is ~£120K currently, the only people making money at that level are those who have held onto the property for some time, pre 2002/2004.
Pesonally, I think that the LHA distorts the market by raising the baseline on properties at the lowest end.

[northernladuk]

That would be much appreciated.

Buy To Let

Here they are...

Exactly, in the area I'm involved the break-even point is ~£120K currently, the only people making money at that level are those who have held onto the property for some time, pre 2002/2004.
Pesonally, I think that the LHA distorts the market by raising the baseline on properties at the lowest end.

That's exactly what it is here as well. For that price the best you can hope for is a two bed mid terrace.

[ASB]

I do have a pretty good spreadsheet I found that allows you to put in all the costs to buy, income (with factor for empty property) and estimated percentage raise in sale price in x years and it gives an ROI on the property. I will see if I can find it on the web and link it.

The problem I have in my area is that the rents don't go up in line with the cost of the house. Anything over a 2 bed terraced does not command enough rent to cover the mortgage. I am sure this is not true for cheaper properties in busy town areas but in desirable out of town areas the market for 3/4 bed family homes means they are just not priced for letting. That is unless you are happy to put a bigger deposit in to bring the mortgage down but if you were going to do that you would probably just get 2 cheaper ones and both rents cover each of the costs. That means flats become an option even though they aren't the best.

Its not just your area. House I an letting, 4 bed. 2 bath. 190k. Rent 800 pcm.

2 bed flat 105k. Rent 575.

1 bed flat 90k. Rent 525.

If yield were the only factor id flog the house and buy 2 flats. If I were entering the market with the purpose of letting then I would do the same.

But im not. Factor in all the charges and the flats are slightly ahead. 2 bed house makrs same as 2 bed flat. But costs about 25k more.

all areas differ of course.

[Lockhouse]

Another factor is that repairs to a 100k house cost about the same as repairs to a 250k house but it takes a lot longer to make it back up in rent.