Does Cheap Property Make A Good Property Investment?

26 Oct

Today I have been struck by the inordinate amounts of cheap property going to auction.

And when I say cheap – I mean cheap. I mean so cheap you could buy it with a credit card – Hell, you could probably even buy it with Tesco Clubcard points!

Take for example, this one bed flat which is going for sale in Liverpool.  It has a guide price of just £6k.  I mean, I know people say it’s rough up North – but 6k – that sounds like it’s GOT to be rough!

Admittedly the photograph does it little justice – but it’s got a roof, it’s got walls…and it may even have some glass behind those security shutters.

Research suggests you might even be able to rent it for around £300pcm – which is an incredible yield.  Of course, that assumes you will find someone who wants to rent it and who will actually pay you the rent – but these are just details.

But how important is the detail?

If a property is cheap enough, is it worth buying just because it’s cheap?

I remember the stories of old, when people used to talk of buying entire streets in Northern towns, towns where you could buy entire streets for the equivalent of a pint of milk.  Houses that were so cheap you couldn’t even give them away!

I’ve never seen these fabled cheap streets, but I do remember in 2004 when I was thinking of buying property in Burnley and the other half stopped me.  He said I wasn’t to buy the s**t there even if it was £7,000 per house.  I was really annoyed with him at the time – especially more when just a few years later I could have sold that very same house, in the very same condition for £40k.

Of course that was during the boom years, otherwise known as the bubble.

Property prices are nowhere near £40k per house – but still you’d probably have to pay at least £15k for one of these trashed Burnley houses at auction nowadays, so it hasn’t dropped quite as much as what you would think.

Which got me thinking: Does cheap property make a good property investment?

Is there a point at which you say – that is just sooooo cheap I have to buy it, just for the sake of the cheap price tag – or do the details (the little details like rental/ resale and all that other investment malarky) really matter so much more than a cheap price tag?

And then I saw this chapel for sale in Wales for £22k.

I love chapels and with such a cheap price tag I couldn’t help myself but start to wonder…of course, it doesn’t have planning and will cost a fortune to convert…but at just £22k…how wrong can you go?

And then just a few lots later in the same catalogue I saw another Chapel for sale, in fact it’s just a few miles away from Chapel 1.  This one has already been converted to 4 flats – so the planning and much of the work has been done for you.

And the guide price for this converted chapel: £55k.

Admittedly, the converted chapel is £33k more than the unconverted chapel, but seriously, £33k isn’t even going to touch the sides in terms of conversion costs for a building of this size.

And then I wondered if a cheap price tag on a property is actually a red herring – because I couldn’t help but notice the converted chapel was a repossession.  And I couldn’t help but wonder if it had been the stratospheric conversion costs which had bled the former owners dry?

And surprisingly – the £6k flat in Liverpool – that’s also a repossession.

Which really makes me wonder: Does cheap property make a good property investment?

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