When you are looking for your next buy to let property you may be tempted to check out the so called “property hotspot” areas that on the surface offer the opportunity for higher returns because the purchase price is so low.
The problem is that if there is further deterioration in the area then your purchase can lose even more of its value. Your income opportunities take a nose dive and they may even disappear altogether. You will then have a property on your hands that has become a real headache.
The Demise of Burnley as a Property Hotspot
One of the great property hotspots of recent times was Burnley in Lancashire. But things have changed and landlords in the area are worried. A landlord with a long term tenant expressed his concern that if his tenant was to leave he would have little to no chance of replacing the income that the tenant provides.
The problem in Burnley is not about the property owned by the landlord in question. It is the fact that the other houses in the row are in a state of dilapidation and many of them have had their doors and windows boarded up.
This leads to all kinds of undesirable problems such as drug users, damp problems, rats and so on. Tenants do not want to live in the same row of houses where these problems are occurring. These changes can happen quickly and the street in question in Burnley has suffered from this over the last five years.
No Compulsory Purchase
If a street ends up in this state in some other areas the council will take action by compulsory purchasing the properties. At the very least they will attempt to contact the owners of the properties and alert them to the work that is required.
The council in Burnley is unable to purchase the dilapidated properties because it doesn’t have the budget to do so – a common problem these days. They have stated several times that all of the properties in the street are privately owned and that the repairs are the sole responsibility of the owners.
The unfortunate landlord that his property in the middle of all this has had to pay an additional £500 a year for his house insurance because of a claim that he made for dampness caused by one of the run down properties.
But the biggest fear of this landlord is that his tenant wants to leave after so many years renting the property. He doesn’t blame the tenant because the conditions are awful. The landlord said that if his tenant leaves then he will end up boarding up his property as well because he will never find another tenant that wants to live in such a bad street.
What Lessons can be Learned from this?
You need to take a really close look at the surrounding properties when you are looking at “property hotspots”. The house prices are very low for a reason – so understand what that reason is and then evaluate if your purchase is viable or not.
If there are dilapidated houses next to your intended property then find out what the local council is doing about it. Will they compulsory purchase the properties? Are they pressurising the owners to repair their properties?