Walsall man inherits £110,000. The Bank or Property?

Walsall man inherits £110,000. The Bank or Property?
Walsall man inherits £110,000. The Bank or Property?

I  had an interesting email from someone in Walsall a few weeks ago that I want to share with you – don’t worry I asked his permission to share this with you all.  In a nutshell, the gentleman lives in Streetly, he is in his mid 60’s and still working.  He has a decent pension, so that when he does retire in a couple of years’ time, it will give him a comfortable life.  He had recently inherited £110,000 from an elderly family member.  One option he was considering was to put it into a savings account.  The best he could find was a 2 year bond with the Post Office which paid 1.9%; meaning he would get £2,090 in interest a year.

One of his other options was to buy a property in Walsall to rent out….

….and he wanted to know my thoughts on what he should buy, but he had concerns as he didn’t want to take a mortgage out at his time of life.  He was also worried about all the tax changes he had read about in the papers for landlords.

Notwithstanding the war on Walsall landlords being waged by the Government, the attraction of bricks and mortar endures for many.  As our man is a cash buyer, he would not have to deal with the intricate cut to mortgage interest tax relief that will diminish, or even eradicate, the profits of many Walsall landlords.  It’s true he would face the extra 3% in stamp duty to buy a second property, but with some good negotiation techniques, that could soon be mitigated.

I told him that buying a Walsall buy to let property is all about the total return on investment.  True, he could put the money in the Post Office bond and receive his interest of £2,090 a year or, as he rightly suggested, invest in property in Walsall.

The average yield (equate yield to the interest rate on his Post Office savings account) at the moment in Walsall is 3.41% per annum, meaning our potential F.T.L (First Time Landlord) should be able to, depending on what he bought in the town, earn before costs £3,751 a year.

However, I told him there are plenty of landlords in Walsall earning half as much again (if not more), if he was willing to consider more specialist investment types of properties – again, if you want to know where – look at my blog or drop me an email.

The bottom line is that the success of investing in Walsall buy-to-let property versus a savings account with the Post Office, or whatever Bank or Building Society is offering the best rate, will depend on the performance of those assets.  Unlike with a savings account, with property the capital you invested can also go up – and yes, it can go down as well – more of that in second.  Property values in Walsall have risen in the last twelve months by 1.8% meaning, that if our chap had bought a year ago, not only would he have received the £3,751 in rent, but also seen an uplift of £1,980 …meaning his overall return for the year would have been £5,731 – not bad when compared to the Post Office!

…  but the doom mongers amongst you will say property values can go down, as they did in 2008, and in 1988 and 1979.  Yes, but after 1979 prices had bounced back to their ’79 levels by 1984 and went on to grow an additional 58% in the following four years.  Then again, they dropped in 1988 and did take 13 years to reach back to those ’88 figures, but in the next six years, they then increased by an additional 66%.  Now, according to the Land Registry, average property values in Walsall currently stand 10.61% below the January 2008 level, and anecdotal evidence suggests that in the ‘nicer’ parts of Walsall, we are well above these sorts of levels.

… and what would that £110,000 get you in Walsall?  A decent 3 bed terrace on Lord Street, a really nice 2 bed town house in Tamebridge or a stunning  town centre apartment with tenant in situ .. in fact, the world is your oyster.  But which Oyster?   Well, my blog reading friends, if you want to read similar articles like this and what I consider to be the very best of buy to let deals in Walsall… just ask me!

Phone: 01922 311016

Email: info@ashmorelettings.co.uk 

 

 

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