Well my Hampstead Property Blog reading friends, as seems to
be all the rage with Jeremy Corben asking the PM questions emailed in to him at
Prime Minster Question Times, I to wish to answer a question emailed into me
from a potential Hampstead landlord last week. Nice chap, lives in Primrose
Hill, and it turns out, after having a coffee with him, he works in IT, has a
spare bit of cash (now the kids have flown the nest) and wanted to buy his
first buy to let property.
His main question was ... Do I buy
a freehold house or a leasehold flat in Hampstead?
Most people will say freehold every time, because you own
the land. However, it’s not as simple as that (it never would be would it!). The
definitive answer though is to research what Hampstead tenants want in the area
of Hampstead they want! The tenant is ultimately your customer, and, if they
don't want to rent what you decide is best to buy, then you are not going to
have a successful BTL investment. So starting with the tenant in mind and working
backwards from there, you won’t go far wrong. In a nutshell, find the demand before you think about creating the supply.
Leasehold flats and apartments in Hampstead are excellent in
some respects as they offer the landlord certain advantages, including the fact
a flat can be initially cheaper to buy. Yields can be quite good, offering better
cash flow. The building will already be insured and yes there is a service
charge, but it’s still for a service at the end of the day and that cost is
spread between many others (i.e. when your freehold house roof goes, its falls
100% on your shoulders) and one of my favourites is that there is often no
garden to maintain or blown down fences to replace!
However, some Hampstead leasehold flats can suffer from poor capital growth. Some leasehold properties have no cap on the level of the service charge and it may get out of control. The length of the lease will significantly affect value if not renewed before it gets too short. Thankfully there’s not many, but some Hampstead apartments/flats have burdensome clauses. Finally, with leases, there can be sub-letting issues – which means you can’t let them out.
However, some Hampstead leasehold flats can suffer from poor capital growth. Some leasehold properties have no cap on the level of the service charge and it may get out of control. The length of the lease will significantly affect value if not renewed before it gets too short. Thankfully there’s not many, but some Hampstead apartments/flats have burdensome clauses. Finally, with leases, there can be sub-letting issues – which means you can’t let them out.
So what do the numbers look like? Well since 2003, the
average freehold property in Hampstead (detached, semis and terraced) has risen
from £731,908 to £2,967,593, a rise of 305% whilst the average Hampstead
leasehold property (flats and apartments) has gone up in value from £347,012 to
£929,031, a more mediocre rise of 168%.
I was really interested to note that of the 29,706 rental
properties in the Camden London Borough Council area that the Office of
National Statistics believe are either let privately or through a letting
agency, 27,199 of them (or 91.6%) are apartments. However, there are 83,035
apartments in the whole council area (be they owned, council rented or
privately rented), which represents 85.1% of the whole housing stock in the
area. This really intrigued me that, quite obviously, there is a very high
proportion of Hampstead’s leasehold apartments/flats rented to tenants compared
to detached, semi’s or terraced. Fascinating don’t you think?
Every Hampstead apartment block, every terraced house or
semi is different. Like I said at the start, the definitive answer though is to
research what Hampstead tenants want in the area of Hampstead they want. Demand
for suburb centre apartments, near the nightlife and transport links can be
popular and can offer the Hampstead landlord very good yields with minimal
voids. However, Hampstead terraced houses and semis, whilst not always offering
the best yields (although sometimes they can), they do offer the Hampstead
landlord decent capital growth.
My advice to the prospective landlord as it is to you is do
your homework. One such website, which
only talks about the Hampstead buy to let Property Market, is the Hampstead
Property Blog. Another source of info many Hampstead landlords use is me! What
many Hampstead landlords do, irrespective of whether you are a landlord of
ours, a landlord with another agent or a DIY landlord, if you see any property
in Hampstead, that catches your eye as a potential buy to let property, be it a
terraced house, semi or flat ... email me and I will email you back with my
thoughts (although I will tell you what you need to hear .. not want to hear!)
If you are looking for an agent with experience that can help you find the right tenant for your property, then contact us to find out how we can get the best out of your investment property. Email me on chris@ashmoreresidential.com or give me a call on 020 7435 0420. Pop in for a chat – we are based on Ashmore Residential, Suite 7, 25-27 Heath Street, London, NW3 6TR. The kettle is always on.
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