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Property

from Cathy (cathyvpreece@aol.com)

Times

April 02, 2004

Features

Follow your own council

Our correspondent meets an investor who buys ex-local authority properties on her doorstep

BUY-TO-LET investors often have a favourite type of tenant. Some target top executives whose corporate employers foot the bill. Others perceive young professionals as the most reliable and profitable. For Haydee Softley, it’s the lower end of the market that provides the richest pickings. And for her purpose, former local authority homes are ideal.

Over the past four years, since she became a full-time property investor and landlady, Haydee has bought and sold 45 properties, most of them ex-council homes in South London. Her hunting ground stretches from Borough to Kennington via Elephant & Castle. It’s an up-and-coming part of London where prices are still rising and big council estates dominate the skyline. But most importantly it’s on her doorstep and she knows it very well.

“I have been living around the area for years and you get to know the streets. I like areas that are a bit quirky but also have a lot of oomph,” she says. “Even if the market falls, prices would still keep on rising down here because there is so much improving going on.”

Former council housing often conjures up images of poor-quality buildings, difficult neighbours and crime. As Haydee puts it: “A lot of people are scared of buying ex-local authority homes because they are not pretty to look at.”

But research from Residential Property Investment Management (RPIM) suggests she is on to a good thing. Figures from the property investment company show that the average “yield” (the rental income expressed as a percentage of the property’s value) on an ex-local authority let is just over 6.5 per cent while the yield on Victorian lets is 6 per cent. Graham Gould, of RPIM, says: “As property prices have risen, ex-local authority has become more attractive — it is often the only property a first-time buyer can afford in London.

“Although it has not yet happened, ex-local authority property could experience more capital growth than traditional Victorian property as first-time buyers compete to get on to the property ladder.” That said, the study also shows that the location of the property is as important, if not more so, than the type of home. “The secret of property investment is the specific property that is purchased. A good-quality ex-local authority property will perform better than a poor Victorian property.” The best-performing Victorian property in the company’s portfolio provided a yield of 33.6 per cent, the worst 13.3 per cent. The best ex-council home brought in 27.1 per cent, the worst 17.7 per cent.

Haydee has ten properties in her portfolio. She buys mostly at auction and, for every purchase, views between 30 and 40 different homes. She targets ex-local authority homes because they are cheaper and often more spacious than the equivalent period property.

Her ideal buy-to-let is on the edge of an estate and in a brick building fewer than seven storeys high. Flats on the top floors of tower blocks are often difficult, if not impossible, to mortgage. Her research involves walking around the estate early in the morning “to check whether there is any loud music playing” and late at night “to see if I feel safe. I wouldn’t buy anywhere I wasn’t prepared to live”.

Although Haydee does not shy away from buying crumbling homes, she views these as “turnaround” properties to do up and sell on fast. A rental home must require no more than a paint job. “The idea with buy-to-let is that you spend the minimum amount of money from start to finish in order to achieve the best possible yield,” she says. “It’s not rocket science. It’s common sense and a lot of legwork.”

THIS former local authority flat offers easy access to the City for just £175,000. It has two double bedrooms and a 12ft 10in by 11ft 10in living room. Both Borough and London Bridge Tube stations are about a 15-minute walk away. You can expect about £1,000 a month in rent and the annual service charge is £400. Movingspace.com: 020-7793 1999, www.movingspace.com

(posted 7296 days ago)

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