PROJECT STARTED SEP 2014
This case study will be a deep dive into a deal I did back in the summer of 2014. Most of my properties are what would be classified as "vanilla buy to lets" and this is an example of one of them. Although a single-let, buy-to-let property is a popular method of investing, I would suggest trying to diversify your portfolio if possible and being open to using various strategies. I am currently completing a lovely little rural cottage that I am hoping will run well as serviced accommodation. This is new to me but I am excited to try something new and see different results. I hope that this case study provides you value and gives you a detailed view of a real property deal.
I found this deal online - through TSPC, my local online solicitor portal whilst scrolling and having a general look for properties. This two bed flat stood out to me for a variety of reasons - it was relatively new (built-in 2000), in good condition that required no renovation and had been previously rented successfully as a buy to let. It was on the market for £78,000 but had a home report value of £85,000. The flat had been on the market for over 6 months and I saw a good opportunity for negotiation. It seems as though there were signs of subsidence near the back garden area and I believe this was putting buyers off even though it was not directly impacting the property.
Before putting in the offer I did research on how much rent I could receive by looking at online portals and calling local letting agents. I found that I could receive around £500-£550 pcm for the property and after running figures for rental yield and return on investment, the deal made sense and I was happy to proceed. The property was in Dundee and relatively close to the city centre - just 5 minutes on the bus.
I found out that the seller was a doctor who had moved down south and was looking to sell up. I initially offered £70,000 and through negotiations with the seller's solicitor, we eventually settled on £74,000. I never negotiated with the seller directly, it was always through his solicitor.
I used a buy to let mortgage to purchase the property. I had to put down a 25% deposit and the remaining 75% was through an interest-only buy to let mortgage. I choose an interest-only mortgage so my monthly cash flow figure would increase due to the lower mortgage payments.
The property was in good condition, did not need any renovations, just a good clean. I also managed to have the furniture included in the purchase - meaning I could keep it in there and rent it out furnished, which was a bonus.
I managed to rent to property relatively quickly and get £550 per month, which was great! That tenant stayed for 3 years and I have had one other tenant who has now been in the property for over 1 year. The rent is still at £550 and the property continues to produce a nice monthly cash flow.
Initially, I took a 2 year fixed BTL mortgage when I bought the property and after that ended I did a product transfer onto another 2-year BTL mortgage. Once this ended I then transferred onto a 5 year fixed rate BTL mortgage. I did this so I could fix a good rate in the long-term, securing that high monthly cash flow. I also done this as remortgaging to withdraw equity is not a huge priority for this property as there is not a huge amount of equity within the property. I estimate that the flat is worth around £85,000 in today's market. This can be a negative with buying cheaper properties and not renovating - they can be slow to go up in value and therefore not create a huge amount in capital growth unless it's over a long period.
Below you can see all the figures from the deal. I hope that the story of the deal and the figures can paint a good picture of what is needed and what to expect when investing in property. I understand that this deal is not hugely exciting compared with some of the other strategies, but it is a high-yielding, lower-risk investment that can help you build your way to financial freedom. I now have 12 buy to let properties and they have helped me gain my financial freedom.