Buy-to-let investors in the UK are increasingly prepared to pay a premium for homes that they can move tenants into without needing to do work on the properties first, a new survey has revealed.
For years, savvy investors have frequently turned to properties at the likes of auctions, where they can pick up stock for low prices, renovate them and then make healthy returns, but the rental market is now so strong that they prefer to pay more up front and have tenants move in as soon as possible, according to the latest survey released by HSBC.
It said that renovated or perfect condition stock typically costs 43 per cent more – £58,500 on average – than properties that need to be repaired or renovated before they can have someone move into them.
The main benefit for landlords of doing this is that they are able to get their property onto the market without delay, which is preferential at a time when the private rented sector is performing strongly, with high demand and yields in excess of six per cent.
However, as well as this, landlords who are paying for homes ready to move into are also able to attract yields of one per cent more than renovated properties on average, according to the HSBC research.
Across the nation, the survey showed, the average monthly rent for a property in perfect condition is £872, which is far higher than the income investors are able to make in renovated properties, where it averages at just £498.
“Ready to move into properties are often the savvier choice for landlords looking to purchase additional buy to let properties. Not only does this avoid the need for lengthy and expensive renovations, it can also result in higher yields in most areas of the country,” said Peter Dockar, head of mortgages at HSBC.
“While the initial purchase price will be significantly higher, rental returns are also improved, making monthly mortgage and maintenance costs more palatable,” he added.