How Derelict Houses Can Spice Up Your Property Portfolio

To neighbouring residents, derelict houses represent an eyesore and declining property values. To investors, they represent the opportunity to build a portfolio with high yields well into the future. Now more than ever, below market value prices and great interest rates make this the perfect time to invest in buy-to-let properties.

Why should you buy derelict houses for sale? Because they offer:

  • opportunities to take advantage of a buyer's market
  • the ability to build a portfolio with long-term returns
  • higher yield than other types of investments.

A Buyer's Market

Whenever home prices are below market value and inventory is high, you have what is known as a buyer’s market. The best prices can be had under these conditions. That's true whether you're talking about straight sales or derelict houses. Bargains abound all over the place.

Banks add to the attractive nature of derelict houses by offering even lower prices than the traditional market. Let's face it; banks are not trying to get rich selling foreclosed properties. They are trying to break even or recover as much of their losses as possible.

To the investor, this represents the opportunity to "go long" – as they say in stock market investing. It's an opportunity to buy cheaply so you can take advantage of rising rents and real estate values in the future.

Long-Term Returns

When it comes to long-term returns, very few things tend to spice up your portfolio quite like derelict property for sale. One only needs to take a look at historic real estate trends see this in action. While it's true that real estate prices may fall in the short term, they eventually rebound and rise again.

Investors looking to build a portfolio with long-term returns 20 and 30 years into the future have a virtual gold mine in derelict houses. For the investor in his/her early 30s, a good selection of properties can provide him/her more than enough income in retirement years. Where securities-based investments are a lot less predictable over several decades, real estate tends to remain stable.

Higher Yield Investments

Derelict houses are very attractive to investors because they offer higher yields than other types of investment vehicles. That's not always the case, as precious metals and some commodities demonstrate, but when compared to traditional, low risk investments, real estate does so much better.

Let's just say you follow the 10% rule that states you never invest more than 10 times what you can get in rent. On a flat you rent for £500 pounds per month, you would keep your initial investment at £60,000 or less. Then let's assume you raise your rent 2% every year.

Factoring in your mortgage payments and any money you spend on upkeep and repairs, you may only see a yield of two or three percent for the first few years of ownership. However, once the mortgage is paid off, it's nearly pure profit. Your initial £60,000 investment could bring in two or three times that over a 30-year term. You are not going to get that kind of return in many other places.

Derelict houses do indeed spice up your portfolio like very few other vehicles. If you are looking to build a long-term portfolio, you should seriously consider getting into the derelict houses market.

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Nick Hopkinson

by Nick Hopkinson - Property Investment commentator and Fruitful founding director.

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