Buy to let flats or houses?

In the office the other day we  were discussing the relative merits of buying flats as investments and where to buy them. 

Many people who aspire to become buy to let landlords start off with flats because basically they cost less!   And then whilst I was in full flow to the girls in the office (they have to put up with a lot!) , low and behold a chap came into the office and asked for advice on where to buy a ‘buy to let’ flat in Weymouth and was it the best type of property to buy as he had limited funds and wanted to maximise his returns.

After the usual introductions and the offer of a cup of tea we got down to some serious discussion and RESEARCH!   The generally accepted opinion is that flats offer greater yields but less capital growth than houses and flats in cheaper areas offer higher yields again. 

We picked two popular areas to rent in Weymouth quite close  together and well known to any local, Wyke Road and Rodwell Road.   Average prices for two bed flats in Wyke Road are at around 142k and looking back to 2001 were selling at that time for around 50k which points to a respectable increase of 65%.   (Detached houses on the same road show only 51%)

When we turned our attention to Rodwell Road average prices are higher at 169K but in 2001 you would have parted with 95K to buy showing only a 43% rise over the period. 

Rental values are not much different with a relative new build returning £700 and a converted older flat showing £625 to 650.   Comparable yields therefore for a  typical older 2 bed flat are 5.28% on Wyke Road and 4.43% on Rodwell Road which is some 19% more!   Bearing in mind that the cost of purchasing in Wyke Road is significantly less and it may show greater capital growth in the future the figures would seem to suggest that a flat in Wyke Road would be the better investment.

If you have such a dilemma and would like to talk it over please pop in to our offices and I would be pleased to discuss your options with you.  Our gentleman has gone off flat hunting and we have been delighted to comment on his various ‘finds’ with regards to yieds and growth as we build a short list with him.

APW