I received a call from an investor this week looking to buy a property for rental in the Walsall area. He said he has a varied portfolio around the country but Walsall had piqued his interest as it sits right in the middle of two cities; Wolverhampton and Birmingham. With so many properties and many sub-areas of Walsall, what type of property and in which location would bring about the best returns? What to do?
From the July rental figures below, you can see that although they still represent the largest number of total rental properties on the market at this time, the total number of 2 beds available to rent in Walsall has fallen by over 11% since this time last year, with 1 & 3 beds strangely up year on year by 13% respectively. Also during this month, 4 & 5 bedroom properties have still been available in the same proportion of the overall market as ever, yet numbers of larger 5 bed properties is down a huge 45% since last summer. I can only conclude that the lack of 2 bed properties is more down to the fact that, for us at least, virtually all 2 bed properties are let ‘off market’ ie before having to be advertised, such is the high demand, and it is likely that many are never seen on the open market and therefore not reported. It also shows once and for all that a 5 bed house is really of minority interest and not something highly sought after locally. Overall though, the rental market is virtually the same size as it was a year ago, but you can rest assured that demand has increased significantly as private renting is fast becoming the default option for almost all of the next generation.
So, as an investment property, what should you buy to maximise your exposure to the broadest possible market? Isn’t it better to look for trends in demand and see where to pitch your supply in order to stack the numbers in your favour?
Demand is always strong for rentals consisting of up to 3 bedrooms, but as usual it is 2 beds that the market was crying out for this summer, yet low availability has brought about a severe lack of good properties and hence a panic when they are released, with people literally begging us to reserve them unseen. Rents on most 2 beds are now in excess of £500 PCM, significantly more so for really well appointed properties which can approach £600 PCM. Even 1 beds are now regularly advertised at around £450-£495 PCM and are achieving this without a problem. It is quiet now as we are in the midst of the school summer holidays, and from mid July we noticed a drop in the number of families with school aged children looking to move, but by early September they will return and drive the market for the autumn.
On the sales side of the market, there was a huge drop in the total number of properties seemingly available, and this can partly be attributed to the new portal ‘Onthemarket’ attempting to break Rightmove’s dominance, but also we are finding properties selling regularly for above their asking price, and very quickly, with a return to the old practice by prospective purchasers of ‘gazumping’ or offering over someone else’s best offer, resulting in much quicker turnover than last year. Either way, we are seeing a continuation of the drought of decent properties that started in the new year, and the chances of finding a significantly below market value (BMV) property right now are low, with projects, renovations and poorly presented houses selling for what many would consider to be ‘silly money’, because right now everyone wants to be back on the property ladder.
So, back to my investor and what to do? I have made some appointments with local estate agents with my pick of what I would call ‘hot properties’. With a formula that works well for me when I look for a buy-to-let (more on that in later posts). We will be attending together to view these properties where hopefully over a light lunch I should be in a position to advise him further in the process.
If you are looking to purchase a rental property and need me to source, negotiate and find you a tenant then please do not hesitate to get in touch.
Phone: 0345 257 9850/ 01922 637672 or