Blocks of Flats – Invest or Not?

Thu, September 13th, 2018

The pros and cons of investing in flats in Liverpool

When working out your property investment strategy you may be tempted to go for a particular type of bricks and mortar investment e.g. HMOs, blocks of flats, student properties, serviced apartments etc.

Which kind of investment you opt for often depends on how comfortable you feel working in a particular property sector, as well as how much you stand to gain in terms of a better yield. And certainly one of the star performers these days is blocks of flats (also known as multi-units). And here’s some of the main reasons why:

Pros of investing in blocks of flats

  • Impressive yields - expect an average of around 8.1%;
  • Yields are almost as high as those from HMOs but they’re a lot less work and you don’t require a special licence from the council like you do with an HMO;
  • More people than ever before are renting and in a vibrant city like Liverpool there are plenty of job opportunities for the younger generation (who tend to prefer city centre living in apartments);
  • It guarantees a long-term and consistent income for investors;
  • An individual one bedroom flat in 2017 could command yields of 4.95% compared to 4.08% for a one bedroom house;
  • Flats are usually less expensive to purchase than houses;
  • Void periods aren’t too much of an issue i.e. if one isn’t rented out, you’ll still be receiving income from others in the block.

Cons of investing in blocks of flats

  • At Sourced, we’re not the only ones who see the potential in investing in blocks of flats - to the extent it’s becoming competitive (last year more than £2 bn was invested in the purpose-built flats for rents);
  • Landlords of HMOs last year received higher yields at 8.9%;
  • It’s more difficult to find financing for flats than it is for houses.

Meanwhile, according to property portal Zoopla, flats in the UK rose in value by more than 28% over the past five years and more than 256% over the past two decades. Over the longer term, flats fared better than detached houses (which increased more than 245%) but not as well as semi-detached houses at more than 269% and terraced houses with highest jump at more than 281%.

In a near reversal of long term trends, in 2017 flats out-performed all other property types in Merseyside, according to estate agent’s Your Move. They recorded flats as 11.8% higher in value. Detached homes were next at 8.5%, semis at 4.7% and, lastly, terraced property with a 3.9% increase.

Investing in flats in Liverpool

It may have been lurking in neighbour Manchester’s shadow for some time, but it’s safe to say Liverpool is today definitely emerging into daylight. With the average price of property in the Beatles’ hometown now sitting at £117,700 according to Hometrack, Liverpool remains an affordable location in which to invest. But it’s advisable to move fast: the value of property in Merseyside grew 0.8% last year - 0.2% higher than the national average.

And there is no shortage of investment opportunities either, mainly thanks to the £5bn regeneration of 150 acres of land at the city’s Central Docks. Another £260 million is being spent on transforming the Anfield area and other neighbourhoods in L4.

If you’re interested in investing in flats in the Liverpool area please click here to contact Andy Smith Director of Sourced Liverpool.

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