It’s such a great discussion, because every investor I know has a strong opinion on the matter. On one side you have the ‘never buy a flat the service charges take all the profit from you and the flat never increases in value’. Then the other side usually pitches in with, ‘you will always get a higher yield on flats, they are cheaper, more available and the freeholder does all the major works to the building’. What works in one area may not work in another, so I will only give you my knowledge and experience which is on the Bournemouth property market.
Let’s start by having a look at what is available on the market to rent
currently and what the demand is like across Bournemouth. There is quite an
even split between houses and flats available to rent. What is interesting
however is that it takes nearly 3 times longer to rent out a house than a flat.
One of the leading factors of this is due to affordability and demand. In Bournemouth
there is a much higher demand for flats and the main driver of this is affordability,
where houses typically rent out for twice the price of flats. The data is
really skewed in Bournemouth mainly due to the University – students are on a
tight budget and typically look for rooms or small flats to keep costs down.
The demand for houses are typically from small families so although it may take
longer to rent out, you potentially have a tenant that will stay in the
property for a considerable longer period of time reducing voids and rental
fees.
One of the main reason some investors prefer houses over flats is due to
the costs associated with the purchase and upkeep of the properties. Flats are
typically leasehold and therefore come with the additional costs of service charges
and ground rent. In some areas, these charges can be quite significant and can
really affect the net rental yield of the property. Houses of course are
purchased as freehold, meaning additional costs are what you choose to incur
yourself. My advice here would be to enquire at a very early stage what these
additional costs will be, and factor those into your calculations. Upkeep costs
can vary but do tend to average slightly more for houses due to gardens, larger
square footage, more occupants etc. Houses are often more expensive, needing a
larger deposit and higher Stamp Duty costs.
Capital growth is something that can really make a difference to a Buy
To Let investment. This is one of the main advantages to buying houses, they
typically see higher increases in value over flats. In Bournemouth over the
last 20 years, there has been a huge amount of capital growth across all types
of properties. Houses have seen on average over 330% increase in value. Flats
too have seen significant increases, on average 267% So with the right flat you
can see capital growth, but if you consider capital growth to be the most
important factor for you, then a house would be the best option.
So what makes a better investment, a house or a flat? Well that depends
on what house or flat you buy. In Bournemouth there are some fantastic areas
for you to make some really profitable investments. Choosing to buy a flat or a
house is a personal decision and it depends on what you are looking to achieve
with your investment. Flats are typically cheaper and can provide higher yields
and less time on the market – equals greater cash flow. Houses can achieve
greater capital growth and longer staying tenants.
If you would like some individual help deciding what type of property
would meet your needs, please get in touch whether that’s for general advice or
a detailed conversation. I am also happy to help give my opinion on any
properties you are looking to invest in. Remember I don’t sell properties so I
can give you expert advice which is completely impartial.
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