Advice on a deal please

[Jess247]

Hello, I am Jess from Leicester. I have around £115,000 cash to invest from inheritance, and have been looking at property. I have seen a deal where I can buy a 2 bed house in Lancashire, 30 minutes from Manchester where they will guarantee the rental income for the first 2 years at 11% gross, and future years at market rate, around 8% gr. The cost for the investment is circa £55,000, and includes all maintenance costs, they offer around 11% capital growth per year, so total return per year is 22%. They will manage the property, tenants, maintenance, and sale of property when I am ready. So Iam thinking about buy two.

Can anyone advise?

 

[Michelle Barringer]

Hello,
Before you buy anything please check all the details - look at the background of the company - see some of there previous work and if possible speak to someone else who has invested with them. Also check what happens if your property is empty and look at the market growth in that area over the last few years to see if this is realistic (you can do this on Zoopla) also check the ownership and who is responsible for maintenance and repair. Also consider how your will exit if you need the money - what is the resale market like?
It is also worth looking around at other options so you have a good idea of the what other options you have and the pros and cons of all of them - if you need any help let me know

 

[Jess247]

Thanks Michelle, that was very kind of you. Much appreciated

 

[Nicholas Wallwork]

Hi Jess,

Is it 11% of your investment or 11% of the property value? Very different things... Check the small print.

Also I doubt the capital growth is guaranteed by them and if it is I'd be wary as how will they back this up if the market dips the other way (markets do go down as well as up) as after the EU referendum things are more uncertain. If the capital growth is not guaranteed (or underwritten) by them, then take those figures with a pinch of salt and do your own market research of that area... Don't believe anything you read in a glossy brochure until you have seen solid track record and experience of the company etc... You can make your own judgment of what the capital growth potential is.

Finally in my opinion NEVER invest for capital growth, invest for yeild. Capital growth will very likely come if you've invested in the right product in the right area but you need a good yield with a good interest rate buffer to ensure you can keep the property going (and ideally income producing!) indefinitely...

Feel free to ask any questions along the way on here and we'll do our best to help...