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Currently in the process of buying my first BTL - a new build in Liverpool and it has a 2 year assured rental yield.
Can anyone share any positive/negative experiences with this type of investment?
I have heard the off story of people not being paid as advertised so any pitfalls to look out for (or any success stories!) appreciated!
Hi Elliot,You need to do intense due diligence on this kind of "investment". Unfortunately, Liverpool has been a hot bed of these type of scams in recent times and millions if not billions of £££s have been lost when developments have either not even been completed, or gone bust shortly afterwards.A rental guarantee is usually just added into the price, so it is really your own money being paid back to you in staged payments, meaning you probably paid slightly over the odds, which again is a negative position to start from.If the development does complete, what is the guarantee based on? Can the developer fulfil it?Finally, how many other investors have been lured into the development? Let's say it all goes well, the development completes, and you receive your rental return for 2 years - what happens then? You will ultimately be competing with other investors to fill your property. Do you understand the rental demand in the area, the supply now, and the supply of property in the pipeline?I regard what you are doing as one of the highest risk investments - Liverpool (scams and over-saturation), guaranteed rent that may not pay out, a flat rather than a house, the list goes on.Sorry that I cannot be more positive, but you did ask!
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
I can guarantee that if you have a assured rent your paying over the top for it
you need to be so careful
I would not touch with a barge pole
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
Great post by VW....
Can I ask, what is
Thanks for your comments, very insightful!
I do feel I have done my due diligence on the area (Crosby/Waterloo) and have been comparing sold prices with my property price, reviewing Rightmove activity and talking to estate agents about rental demand and price of the property etc, working out my ROI allowing for voids and costs etc and it does seem like a good investment.
That being said the assured rental is not a requirement (and if i don't do it then i don't need to purchase the £4k furniture pack which whilst means I can be more hands off does seem rather steep to me), and from feedback so far agents are estimating a rental price £25 a month above the assured rental price which i found interesting.
So i have enquired with the solicitors and the developers for more details as to how the underlease would work and what guarantees i would have and am waiting to hear back. But based on the above and your warnings I am now wondering if i should just let it out myself/have an agent do it for me..
What specifically are your reasons for avoiding it? Non payment or something else? Any other thoughts/experiences welcome!
Do you get a discount if not taking the "rent guarantee"?
No further discount as such but If i dont do it then the £4k furniture pack is not a requirement. I've found out they pay in arrears and quarterly, which I'm not so keen on either.
I've emailed a number of agents who have given similar (some higher, one lower) figures to the assured rent so I'm wondering if best to do not do it after all. I'm sure I could furnish a 2 bed nicely for less that 4k too.. Any recommendations for companies who could help with modern but well priced Furniture packs? I'd also look at getting rent guarantee insurance.
However as it's a new build so I only have access once it completes I'm worried I'd lose some time getting the furniture in, doing viewings etc vs the assured pay from completion day. Perhaps I could market it in advance with the CGIs to minimise the time..
Any other thoughts welcome!
Rent paid quarterly in arrear is worse than a new UC tenant with a delayed claim in with DWP!
The Rent G'tee is only as solid as the underlying Company - so as Vanessa said - intense due diligence needed!!!
RGI at around £100 pa is a total no brainer - but does mandate that tenants stack up on financials at outset - so you would need to ensure Company hands over all the credit checks/banks statements etc and does not try to hide behind GDPR!.
Buying a newbuild seems also not to stack up from investment standpoint - it is only "brand spanking new" ONCE - and new builds usually come with a substantial premium versus second hand local property - so you could end up selling for less in a location with little cap growth.
In Leeds pre Credit Crunch there was an excess of new build 1&2 bed flats - when market was looking for family homes. A good number of investors got badly burned when they later had to offload at around half what they paid.
Update: I am going ahead with this purchase but still undecided on taking the assured rental yield or not for the 2 year period.
Financially it actually seems to work out slightly better the 4k furniture pack plus the 7% yield vs my 2k estimate for furniture plus the average ive been told i could rent it for from local agents, which is similar to the 7% offered. The main reason for this is there is no service charge and insurance (£1350 a year) to pay if I take the assured yield offer.
So I'm now leaning more towards this. The payments are quarterly and it should complete in September with first payment end of September so not as bad at I thought in terms of wait time for payment and it would be more hands off as no furniture or letting to arrange.
Does anyone else have any other positive or negative experiences of assured yields?
Anything to look out for in the contracts?