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HSBC: Quality counts when it comes to buy-to-let

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Buy-to-let investors may need to get the paint-brush out, after new research showed that property in immaculate condition can command up to 75 per cent higher rents.

The average rental income for a two-bedroom property in immaculate condition is up to 75 per cent higher than for properties in poorer condition, according to HSBC.

Just 38 per cent of landlords are prepared to take on the challenge of a fixer-upper when expanding their buy-to-let property portfolio, despite the much higher costs associated with buying a property in perfect condition.

While an immacualte property costs an average of 43 per cent more, according to HSBC’s research, it will command an average £838 per month compared to a lesser property’s £498 per month.

On average properties requiring extensive refurbishment offer an average yield of 4.4 per cent, a full percentage point lower than the average yield on an immaculate property. Only in Liverpool and Edinburgh is it more beneficial to buy a fixer-upper.

Renovation could be a viable option; while a new kitchen, bathroom and redecoration of four rooms typically runs around £10,428 the work could add as much as £58,557 to the value of a property.

Peter Dockar, head of mortgages at HSBC, said: “Ready-to-move-into properties are often the savvier choice for landlords looking to purchase additional BTL properties. Not only does this avoid the need for lengthy and expensive renovations, it can also result in higher yields in most areas of the country. While the initial purchase price will be significantly higher, rental returns are also improved, making monthly mortgage and maintenance costs more palatable.

“The choice is clear for landlords hoping to make the most out of their investment: either purchase or renovate a property to good condition or risk lower rental income and reduced overall yields.”

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