North-eastern promise

5 April 2012

For property investors finding that the London market does not have as much elasticity in it as it has done, there are still opportunities for those prepared to take a broader perspective.

Such investors are forsaking London and turning to the North-East, where properties are cheap, tenants are plentiful and rental yields work out at around 15 per cent, compared to the paltry three or four per cent now standard in the capital.

Londoner Margaret Sceats has recently taken the plunge. In December 2002 she bought two two-bedroom maisonettes in Gateshead. They have been refurbished and now await tenants at a weekly rental of around £75.

Margaret’s outlay on each property, including renovation, furnishings and legal fees, came to £26,000. This is her first foray into property investment, and until late last year, she had never even been to Gateshead. So how did it happen?

“I was interested in the idea of property investment but was too nervous to take the plunge," she says. “Then I saw an ad for a free seminar so I went along.

“The event was to try to sell non-residential weekend courses to novice investors at £3,000 each. I was horrified at the cost, but then I saw an ad for a similar course at half the price, if you brought along a friend.

"The course, organised by the American financial advice company Russ Whitney, was brilliant and went into every last detail about buy-to-let. There was plenty of opportunity for networking, sharing ideas and a helpline afterwards at no extra cost.

“On the course they kept saying: ‘Go with what works for you’." Margaret decided to go for income, rather than capital growth, and soon discovered London would be too expensive for her. The course identified property-investment hotspots, of which one was the North-East.

Margaret, 55, who has two adult daughters and lives with her partner, Bill, says: “I want to retire early, and as such need to generate income to replace my salary. I discovered that my London flat had risen so much in value over three years that I could borrow an extra £75,000.

“But as I was working full-time, there was a problem of how to research a market so far away. So one of the lecturers signed up a group to visit Newcastle and source the market.

“Twelve of us went up and viewed these old, dilapidated houses. Several companies were offering a complete package: buying and renovating the houses and finding and referencing tenants. I opted for Deneside Developments and bought the properties in mid-December."

At the end of January, Margaret and Bill went to see how the properties were progressing. “They had been gutted and looked wonderful. Everything had been done properly. Within a month of buying, the maisonettes were nearly ready for tenants."

Margaret has decided to become a social landlord, making sure the rent comes straight to her, rather than going to the tenants first. “I feel very confident about Gateshead," she said.

“There is a lot of regeneration going on. But I would never have done anything like this without the course. So many new investors buy properties without doing even the tiniest bit of research, but by the time I bought I felt I knew what I was doing."

Robert Lang, sales director of Deneside, says their clients are mainly Londoners. Most of them are “attracted by the yield" he says.

“We source properties two miles either side of the Tyne in need of extensive refurbishment. We aim to give a return of 15 per cent gross at the social-housing end. But as there are so many poor areas in the North-East, we buy only in certain regions.

“There is a tradition of renting here, so there is always a high level of tenants. We do everything, from surveys to finding tenants and collecting rents." For their services, Deneside charges a 15 per cent management fee, dropping to 10 per cent after one year.

Deneside Developments: 0191 270 8855;
www.deneside.com; email: info@ deneside.com.
Russ Whitney courses: www.russwhitney.com.

North-eastern promise

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