Colchester Property Prices Increase by £42.71 Every Day!
Investing in Colchester buy to let property is different from investing in the stock market or depositing cash in a Building Society but there is another specialist area of property investment I haven’t talked about before called “flipping property“, here’s an idea of how it compares to the alternatives:
- Buy to Let (BTL): With property you can earn from your investment in two ways:
- Capital growth: Any increase in property value over time is called “capital growth” or “capital appreciation” which, in recent times, has been strong in Colchester. You have to bear in mind the value of property can down as well as up – just like shares – but it’s unusual for the value of a property to drop below the original purchase price.
- Rental income: What your tenant pays you, which will hopefully also grow over time. BTL comes with responsibilities (legal obligations) and costs (property management and maintenance) which will affect the return on your investment.
- Building Society Investments: Generally considered by a safe option. Currently the best 2 year bond rate from Nationwide only attracts a 0.75% interest rate so the return on your investment (ROI) would be low.
- Stock Market / Shares: A riskier investment which can give good returns but to avoid having to watch share prices on a daily or even hourly basis most people invest in “managed funds” which doesn’t involve much interaction which doesn’t appeal to people who like to be in control or proactive with their investment.
Buy to Let Yield / Annual Return
To calculate the yield on a property divide the annual rent into the value (or purchase price) of the property. Over the last 5 years, an average Colchester property has risen by £78,300. Take 78,000 and divide it by 1,826 (the number of days in 5 years, including one leap year) and I arrived at £42.71 a day). Yields around 5% a year upwards are typical but can break into double digit percentages for HMO’s (house in multiple occupation) although these may involved added costs and legal obligations.
Flipping Property in Colchester
Flipping Property involves buying a property, carrying out some minor cosmetic changes and reselling it quickly. Property flipping is specialist area which is why I haven’t talked about flipping property in Colchester on the blog before. It can be lucrative, take a look at the examples below. During the 1970s and 80s, when DIY (do it yourself) was more popular than GSI (get someone in), it was popular for couples to move in, renovate, extend and re-sell their property at a profit. They would then re-invest in a bigger property and repeat the cycle to climb up the property ladder – effectively property flipping.
I have seen several investors recently who have made decent returns by flipping property in Colchester. For example:
- Flipping Property in Colchester Example 1: An investor paid £260,000 for a 3 bed semi on Meyrick Crescent in September 2015. It appears some cosmetic work was done to the property and it was resold in October 2016) for £330,000 – a 26.92% return before costs, a compound annual return equivalent to 25.07% AER
- Flipping Property in Colchester Example 2: An investor property flipped a lovely 4 bed detached property on Copper Beeches, paying £285,000 in October 2015 and selling it again after some some cosmetic works, for £359,000 in November 2016 – a 25.96% return before costs, equivalent to 23.25% AER
These examples demonstrate how the Colchester property market has not only provided very strong returns for the average investor over the last five years but how it has enabled some highly motivated buy to let Colchester landlords and Colchester property investors to become wealthy over a relatively short period of time.
As my Generation Rent Forever blog post (and other posts) have talked about recently many Colchester residents have no opportunity or interest in owning their own home and are content with long term renting. Meanwhile buy to let lending continues to grow. If you would like to discuss flipping property or buy to rent property in Colchester feel free to give me a ring on 01206 862288 or email firstname.lastname@example.org. I’m also available to offer a free opinion on Colchester properties for sale. Send me the Rightmove or Zoopla links you’re interested in and I’ll get back to you – often within 24 hours.