Is it better to have 1 rented property with a higher value or 2 at a lower value

danfitzjohn

Hi all,

I am considering investing in a rental property and am deciding if its better to invest in 1 at a higher vale say £200,000 or 2 at £100,000.
The plan is to have this as a long term investment (say 20 years) so was wondering what are the pro's & cons of both options.

Thanks in advance!

Dan

Old_Git

two properties will give you double income ,and double void periods double maintenance . Will the rent on a £200,000 pay the mortgage ,will you be able to cover any void period .It all comes down to location location location

danfitzjohn

It wouldnt be a problem if 1 or 2 months Mortgage payments were missed.
I am more interested in the difference of overall yields vs both options.

thelem

Yeild is going to depend what you pay for the properties and the conditions of the local market.

Two properties means two (sets of) tenants calling you to fix problems and needing to find tenants twice as often. You'll get voids twice as often but they'll only cost you half as much.

G_M

Do the maths!

we can't, as we don't know the facts....

For each scenario, create a spreadsheet showing

* purchase price(s)
* mortgage loan(s)
* repayments
* realistic monthly rent (times 10months)
* marketing costs (times one or 2)
* agency fees
* repairs
*overheads
etc etc

Only THEN can you work out the pre/post tax profit levels for each.

then add in the 'hastle factor'.

New Landlords (general information for new or prospective landlords)
*

WellKnownSid

danfitzjohn wrote: »

It wouldnt be a problem if 1 or 2 months Mortgage payments were missed.

Really? :eek:

ch3101

It depends on what area you're in.

E.g. I stay in glasgow, and you could buy a 3 or 4 bed flat for students close to the city centre. This would get you 900-1200 a month, but then you may may get 8 or 9 months a year so would have to cover the other 3/4 yourself.

Or you could buy 2 1 bed flats in the city centre and rent those to couples for ~£600 a month, getting you 1200 and less gaps between tenants.

OR

you could look a few miles outside the city, where there are great bus/train links and buy 5 1 bed flats, get 300-350 a month, 1500 total. But then you have many many tenants which you may not want to deal with.

It's entirely up to what area you're buying in, what the rental market is like and what investment creates the best yield...

tim123456789

Usually you get better yields from smaller properties.

Though obviously the maintenance costs might be a fixed amount. This isn't a problem if you diy, but will be noticeable if the agent makes all the arrangements.

It's true that with two properties you'll get twice as many voids, but statistically you ought to get lower total missed rent due to voids.

If you get a non-paying tenant and you have two properties you'll only be missing half the rent.

phill99

It's not as black and white as '1 or 2 houses'. 1 and 2 bed flats and houses are much more easily let than larger houses, therefore your void periods
Will be minimised. Plus if one tenant defaults, then you still have something coming in. It's about spreading the risk.

HappyMJ

Yes you get better yields from 2 cheaper properties but you have to pay buildings insurance twice and gas checks twice so the expenses are higher so your profit will probably be lower.....personally though I'd go for 2 cheaper properties as voids will be less of a problem as you should always be getting at least 1 rent payment in each month. Cheaper properties are also easier to rent out...but you might be attracting tenants on benefits which you may not want. Tenants on benefits will not be able to afford a more expensive property.

danfitzjohn

Thanks everyone, I think 2 properties it is as it also gives options when coming to sell....the search has begun!