Investment Focus: Join the Parade

I get a lot of emails, as I'm sure you can imagine. Property investment continues to be a hot topic, and never more so in Belfast than today.

The number one query usually centres around "What are your best deals right now? What can I buy for a good return?"

As you read in Area Profile last week, the gentrification of the upper Ormeau Road continues apace; property in this area represents a smart invesment - not only is the area increasingly desirable as a place to live, but it is still on the up in terms of development and gentification. In other words, rental yield and capital appreciation both look healthy in this part of the city.

We happen to have a very exciting prospect right in the heart of this part of town - so exciting that I feel it merits an article to explore its possibilities.

85 South Parade is a large, three storey mid-terrace property that has been converted into three self-contained flats. On the ground floor, a one-bed with  a large living room, a kitchen and bathroom; on the second floor, a one-bed with living room, kitchen and bathroom, and on the top floor, a two-bed with kitchen, bathroom and living room.

It's on the market for £250,000 and has tenants in situ. It currently commands £17,160 per annum in rent. 

So what are your options? The way I see it, you can go down one of three broad roads here:

 

1. Do nothing

Buy the house, keep the tenants on at the same rental rate, keep the same arrangements in place with the current agent. (ahem, cough cough, I hear they're rather good...)

Looking at the numbers in the simplest of terms, if you get the house for the asking price of £250,000, it offers a gross annual rental income of £17,160. That's a gross yield of nearly 6.9%.

Obviously, you'll have agent's fees to pay and the usual ongoing costs (maintenance and rates, etc.) but this is the path of least resistance. Pay your money, instruct your agent, receive your income. 

The pros and cons should be fairly obvious, but always worth pointing out.

PROS

• The least effort
• Instant return on investment

CONS

• Lowest potential financial return
• Not adding additional value to the property

This is a perfectly habitable property with no known structural issues and three happy tenants, providing a good rental income - a perfectly viable and sensible option for a landlord looking for a large, good quality property in an area of high rental demand.

 

2. High-end holiday let

One way to maximise your profit potential would be to tap in to the growing Belfast market for holiday lets.

In May of this year I shared John Young's story of switching from traditional long-term residential leasing to short-term holiday lets. He is a huge advocate of this approach, claiming to have tripled his income.

To bring the flats up to holiday let standard would, of course, require investment - you would need to replace kitchens, bathrooms and bedrooms and freshen the decor.

As John advised, I would urge anyone going down this route to aim for the unique, characterful, high-quality end of the scale.

The commercial providers by this stage will have the budget end of the market covered. Anyone looking for a cheap and cheerful room or flat in Belfast to crash in for a night or two has plenty to choose from - you're not going to make your money in this segment.

Spending the time and money to make your house a luxurious home-from-home with stacks of personality and detail is the best approach. Aim high; make it a tasteful place that you'd be happy to live in yourself.

PROS

• Higher income
• Higher quality tenants/customers

CONS

• More expense and more work
• Will the bubble burst?

 

3. Convert it back to a house

This property would also lend itself well to being converted back into one large family home. It is a truly magnificent building, close to the leafy end of the Ormeau and Ravenhill Roads, well within the catchment areas for good local schools. 

I estimate you'd need to spend between £30 - 50,000 to do this properly. For a start, you'd need to rewire and replumb and for aesthetic reasons remove the 'fire escape' / bin access.

But if you do it right, you could potentially add £60,000+ to the value instantaneously. 61 South Parade is a nice example of what you could achieve - it's on the market with an asking price of £309,950.

Pros

• Maximise property value
• High demand in this area

Cons

• The most work and the most expense
• No return on investment until you sell

 

And then there's the Wildcard...

Subject to planning permission, you could investigate turning this into a small boutique hotel.

You would need to do your homework - find out what you could charge per room, how many staff if any you would need, etc.

Insurances and running costs could be prohibitive and car parking would need to be looked at - but this is an area of Belfast that could not be trendier right now, and it is only going to continue in that direction for the foreseeable.

Like I say, a bit of a wildcard idea, but perhaps one looking into as well.

 

Hopefully I have gone some way to illustrate what an unmissable opportunity this property represents. Whatever you choose to do with it, it is a smart buy with so many possibilities.

 

If you're interested, or just want to chat over your own ideas, don't hesitate to give me or one of my colleagues a buzz at the office on 028 9066 3106. Alternatively, drop me a line to barry@propertylinkni.co.uk or indeed, pop in to the office at 197 Lisburn Road to talk it over.