A nice two bed flat overlooking the harbour is going to cost in the region of £200,000 and return around 4.2% whilst a two bed house in Sandpiper Way will cost £165,000 and return 4.7%. This may not sound a lot of difference but actually represents a 12% better return.
When you take into account the block management costs of a flat, which can amount to the equivalent of two months’ rent you are looking at a 34% better return. Both properties will rent well and quickly but this does show how important it is to do the sums when investing in a BTL.
Add on the fact that the two bed in Sandpiper Way is around £35000 less money to start with and it becomes obvious where the sensible money goes. Of course not all BTL investors are only interested in the return and may have other reasons to buy a flat with a poorer return but in a nicer position.