Why I don’t like new build flats as buy to lets22 Nov 2016
Quite often I get asked if I think a brand new flat would make a good buy to let investment and my answer is generally the same. No….
I can understand why, particularly inexperienced investors, feel that it is a nice safe option – lower maintenance costs, 10 year guarantee, all new appliances, well kept communal areas, no work to do to get it ready to let.
Those are all true…for now.
The problem in my opinion is that you pay a premium to get this type of property, and as an investor you are not likely to get it back in the rent the tenant pays. Yes the maintenance costs will be less, however what will your return be over a 10 year period? And the likelihood is that with a new build development when you are trying to find a tenant, there might be another 5 flats exactly the same as yours on the rental market too, and how can you differentiate your property which is the same?
Price alone generally so it means that the rent you achieve comes down…which is obviously not good for your return. Also what looks new and pretty when it’s first built doesn’t always stand the test of time and you often see new developments deteriorating in the first couple of years unless they are well factored.
The builder will often inflate the suggested rent they advise you could achieve to encourage the sale so it’s vital that you get unbiased opinion too! You often find the premium you paid to buy the new property takes years to make back and I have often seen clients who have lost money in new builds and have a property after year 1 worth less than they paid for it, because the builder is still trying to sell on the next phase of building, sometimes at a lower price!
That said sometimes small developments come up that are fantastic investments in great locations that might lead to good capital appreciation… But it’s the same general rule of thumb, location sells a property every time!