This week, I was asked for my opinion on a property by a landlord looking to invest. She emailed me a link to the brochure online, and wanted to know if I thought it could be as good an opportunity as she did.

Click here to view the brochure on Rightmove.

The property had been converted into 3 one bedroom flats, and currently brings in a monthly income of £1475.00. Assuming the purchase price is as advertised, the yield would be close to 7.7%, and with demand for quality apartments for professionals in the Uplands and Brynmill areas on the rise, it seems in principle to be a good opportunity.

There is even the potential for further growth in the rental income if the flats could be modernized/dressed/refurbished to a higher standard (without having any internal pictures we are assuming they are in good lettable condition at the moment), and sea views are always in demand.

But then there’s the new 3% surcharge on Stamp Duty.

Prior to April last year, the Stamp Duty Land Tax (STLT) payable on property purchases on this property would have been £2,099. Now, however, it would be a whopping £9,000, instantly reducing the yield to 7.4%.

Even if the flats were being sold individually, the Stamp Duty would be £2,300 per unit, totalling £6,900 for all three. Before the changes, these properties would have been exempt, but it is a saving of £2,100 on what you would pay in Stamp Duty on purchasing the three flats as a whole.

That they are being sold as a whole unit instead of three individual ones raises questions that would need to be put to the agent.

The £9,000 tax will need to be paid in cash. On top of even a reasonable mortgage with a 25% deposit (£57,487.50, to be exact), purchase and renovation costs, there is a lot of cash needed. Whilst cash is king, it could, in my opinion, be used more wisely than giving more to HMRC than is necessary.

Another point to consider with buying three identical/similar properties is that you run the risk of being in direct competition with yourself if they all come on the market for rent at once. It’s never a good idea to put all of your eggs in one basket; spreading our your property investments (a one bed flat, a two bed house, one in the city centre, one in the outskirts) means that if one drops, the other can compensate. If they are all together and the area takes a downward turn, all of your investments will suffer.

Overall, yes – this could be a good investment for a landlord looking to invest in Swansea. I think, however, that there are better, less risky opportunities for landlords to consider that will produce just as good a return, and won’t cost the same as a swanky new kitchen in Stamp Duty.

This property in St. Thomas would easily achieve £650pcm, bringing in a yield of 6.1%, factoring in a Stamp Duty of £3.720.00, and as we can see from the photos, it has been renovated to a really nice standard. Click here to view the brochure on Rightmove.

You can use this handy calculator to work out how much Stamp Duty you are going to pay on your buy-to-let purchase: Stamp Duty Calculator

Want to discuss investing in property in Swansea in more detail, feel free to give me a call!