The so called property hotspots that the property investing gurus talk about offer high yields (high returns) because the house prices are low. But if the area where you are investing in is deteriorating, then not only does your low priced investment lose more value, your income declines or disappears altogether, and you have your work cut out dealing with all the issues that will inevitably arise.
Landlord investors need to be very wary of the run-down property trap. Areas that are declining may look tempting on paper, from an investment return point of view, but every investment needs to be investigated thoroughly – landlords really do need to do their due diligence.
One landlord in Burnley, Lancashire, says that it was once one of the hottest property hotspots in the land, but if his long term tenant should leave he would find it difficult to re-let on anything like the £4,000 per year he takes now, if he could do it at all.
Reported by the Burnley Express last year, this landlord whose name was withheld, says the condition of the private residences in the terraced row where his house is is “disgusting”, most of them in his terrace having been boarded up.
The report says that seven of the 11 houses on the terrace are abandoned, with their windows and doors boarded up. These attract homeless people, rats, and damp and druggies, causing other residents to move out leaving their properties in a state of neglect. All this has happened in the last five years says the landlord.
The landlord went on to say:
“Kids go in, rats go in, the windows are smashed, its wide open: a homeless guy was asleep under the window in the front room…We’ve had problems with rats along the whole block. It’s absolutely disgusting.
“They should be compulsory purchased,” he added. “If not, then it should be the council’s responsibility to contact the owners.”
The property on Florence Street off Accrington Road, Burnley, has been owned by this landlord for the last 35 years, and has been rented by the same tenant since for around 17 years, but the long-term tenant is now making noises that he wants to leave.
The council has told the landlord that as these residences are all privately owned, and unfortunately it cannot do anything about the state of the other properties due to limited funding: Compulsory Purchase Orders cannot be universally issued, and the responsibility lies with the owners, said a Burnley Council.
A spokesperson from the council said:
“We have the empty properties programme, but the responsibility for the upkeep of a property is ultimately down to the owner,”
This particular landlord’s insurance has gone up £500 a year after having a claim to repair damage to his property caused by damp coming through from a leaking toilet, after lead flashing was stolen in the abandoned house next door. This was a £7,000 claim.
“My tenant is debating whether to move, which if that is the case, I’d lose about £4,000 a year in rent,” he told the Burnley Express at the time.
“I’ll just have to board it up and leave it too. People can’t sell, and people won’t buy because of the state they’re in. “It’s wearing me down,” he said.
In some parts of the town Council housing officials have joined with a housing association to paint pictures of curtains, vases and neat front doors on scruffy boards covering a row of empty two up two down terraced houses, to look as though the homes have caring owners.
These look far better than bare boards, but take a closer look and the neat red and blue doors, bouquets of roses and newly drawn drapes are already attracting graffiti artists from this boarded up suburb nicknamed ‘junkie’s alley’, in Burnley, Lancashire.
In reality this street in the run-down Burnley Wood district of Burnley, Lancashire, is perhaps the “hottest” property hotspot in Britain, with one house selling for just £10,000.