Buy one property or two?

JohnDoe1

Hi,

Could I gather you guys opinions please?

If you had £450k to spend as rental investments, would you go for 3 one bed properties or 2 two bed properties? .. Or even just one £450k property?

Mallotum_X

Depends on location and returns.

What rental income would you get on each type, what capital gain is likely. How easy is it to rent each size out in the area you are thinking of...

JohnDoe1

Will be in london (obviously the cheaper parts with my budget!).

broad rental figures are
1 beds from £650-£800 pcm
2 beds from £800-£1100 pcm

I would assume 1 beds would be the easiest to rent out but I have a feeling that maybe 2 beds and upwards will have the higher capital gains...?

Flashmanchop

does it have to be London?

Pixie5740

Based on your rental expectations:

3 x 1 bedroom flats @ £150,000 will give gross rental yields of between 5.2% and 6.4%.

2 x 2 bedroom flats @ £225,000 will give gross rental yields of between 4.27% and 5.87%

So the 1 bedroom flats look to give a better yield but you would have 3 properties to maintain and 3 sets of tenants to deal with.

Capital gains is more tricky to work out and are only paper gains until you sell when you'll be hit with Capital Gains Tax.

p00hsticks

Pixie5740 wrote: »

Capital gains is more tricky to work out and are only paper gains until you sell when you'll be hit with Capital Gains Tax.

But as a general principle, multiple cheaper properties would be better than one expensive one from a CTG point of view, as it will allow you to sell them over a number of years and make full use of your annual CTG allowance each time .

JohnDoe1

Flashmanchop wrote: »

does it have to be London?

Doesn't have to be london but for capital gains, i think that is the place to be, even though you can get slightly better yields from outside london, you won't get the property price rises, unless i am mistaken.

Mallotum_X

I would suggest finding a good letting agent, that is not going to try and sell you property and have a chat with them

My parents have been buying a second BTL and have used their existing agency to help identify properties that will be easier to rent, and the ones to avoid. Their letting agency is not an estate agent so has no property to try and persuade them to buy. Their advice so far has been great.

Pixie5740

p00hsticks wrote: »

But as a general principle, multiple cheaper properties would be better than one expensive one from a CTG point of view, as it will allow you to sell them over a number of years and make full use of your annual CTG allowance each time .

Excellent point

Thrugelmir

Pixie5740 wrote: »

3 x 1 bedroom flats @ £150,000 will give gross rental yields of between 5.2% and 6.4%.

2 x 2 bedroom flats @ £225,000 will give gross rental yields of between 4.27% and 5.87%

Gross yields at that level don't look particular appealing.

Flashmanchop

Pixie5740 wrote: »

Excellent point

I would second that.

have you invested before or will you be a first time landlord?

That is key to the answer you will arrive at, and your adversity to risk, or lack of.

with some knowledge and that level of potential investment there are endless possibilities available to you.