I received a phone call at 8pm last night from a chap who has inherited £100,000. He wanted to get onto the property ladder in Croydon, but was slightly unsure how to begin. After reading a few of my blogs he decided to get in contact with me to ask some advice.
The first question I asked was, ‘do you think you will be getting another £100k in the next few years by means of your job or other income?’. His answer was NO. This created the basis of my answer:
£100k is a lot of money to swim into at one go. In the world of property, especially in Croydon, it can be blown VERY easily, so you should be careful as to how it is spent, especially if that is your only £100k.
Ofcourse, I would advise to spend the money on property, and specifically in Croydon.
My advice is that you spend that money on a property as close to East Croydon Station as possible. Buying at below market value in Croydon is becoming increasingly difficult, however, I am of the opinion that, if you are looking to invest your £100k into property, you want to keep it as low risk as possible. Therefore, buying below market value is not always a necessity. We all know that the Croydon property market is on the up, so even if you buy it at market value today, in the next 5-7 years, you will see a great CAPITAL return.
I’m going to take a live example I have on the books at the moment. I have a 3 bed Victorian house (yes, HOUSE) to rent on Edridge Road, Croydon, CR0 for £420k. It’s currently being used as a HMO and has the potential to bring in £36k rent PA. That’s 8.6% yield. I think this property is going to increase in value by 100% in the next 10 years, and 75% in the next 6 years. This property also needs a little refurb, so you can infact do some small amount of work to increase the property value, and sell it or refinance it within a few years (just after Westfields has been completed).
Now obviously, to buy a £420k house, you will need £105k as a deposit. Which is not far off.
I would personally, invest in something like this. It’s a solid investment, and those Victorian houses are built like tanks… or, well, houses.
Some may say that you should split the money in half. £50k and get two smaller properties (£200k each). In East Croydon, this will typically find you a small 1 bed flat, if you are lucky a run down 2 bed flat slightly further out. Unless the returns are huge (over 10% yield), I wouldn’t take the risk. There is less scope for expansion and options later down the line, and when it comes time to sell.
You should bear in mind, these are my opinions as to what to do when you do not think you will be getting that money in again. If you are quite certain you will see £100k from your personal income every year, or every two years, then I would say play the monopoly game and stock up on as many properties as you can as soon as you can, and keep it near the good stations (East Croydon, South Croydon, Sanderstead, Purley etc).
I recently wrote a blog on ‘Monopoly in Croydon‘, it might be a good read too!
If you would like any advice on the Croydon Property Market, please do give me a call or send me an email on firstname.lastname@example.org.