A common mistake many novice investors make is that they get influenced by their personal taste. While it’s human nature to open our arms to those things we find most attractive, it’s most definitely an act of naivety and bad practise when it comes to property investment. There’s often good business sense behind buying the ugly duckling of the street.
I personally wouldn’t recommend buying a hideous cesspit of a property for primary residency or for with the incentive of a quick property flip, but I would strongly advise being a lot more open-minded for a buy-to-let investment.
A buy-to-let investor shouldn’t focus so much on what a property looks like; concern should be focused on obtaining a property that will get a good rental return. It’s really all about the numbers. If a dirt cheap property that looks like it’s been affected by a disease can achieve a good rental yield, then the investment makes sense.
Among investors it is often said, “Never buy the best house on the road.” Reason being is the nicest properties usually have the least potential for upward appreciation. Additionally, houses can lose value if they are surrounded by less desirable properties, which is why investors prefer to buy mediocre homes in exceptional neighbourhoods, as opposed to buying exceptional properties in mediocre neighbourhoods. But it’s a whole different story when you flip the script and focus on “the ugliest house on the street”. Ugly houses have a lot more potential to grow in value, especially if the houses that surround the rotton egg are not-so-rotton. People tend to notice the value in the overall neighbourhood and that’s when potential in the ugly property starts to capture the imagination.
A lot of investors want to buy solid, structurally sound houses that don’t necessarily carry much “sex appeal”. Essentially, they seek out the less attractive properties because those can potentially get the best returns for what was paid. Less desirable properties can drastically affect the value of a property, making it a bargain purchase, but the margin for rental income doesn’t necessarily sway so loosely. It makes sense, because a lot of tenants that have a tight budget aren’t so fussy about where they rent as long as they have a roof over their heads.
With houses currently out pricing the nation’s affordability level, the rental market is booming. Renting out an ugly duckling amongst the swans shouldn’t be any problem at all, as long as the property is in full working order and presentable e.g clean and tidy. I stress, an “ugly house” doesn’t mean “dirty” house.
So if you’re looking for a good buy-to-let purchase, why not lower your standards and think like an investor? Buy a piece of shit.
Just to clarify, I’m not advising people to buy “the ugliest house in the world“, nor am I suggesting going to Moss Side and picking out the skankiest crackhouse you can find. I’m just saying, going to a mediocre area and finding a property that makes you cringe a little may be a wise purchase. Do the maths to determine your potential returns can be.