The mind-set and tactics you employ to buy your first Loughborough
buy to let property needs to be different to the tactics and methodology of
buying a home for yourself to live in. The main difference is when purchasing
your own property, you may well pay a little more to get the home you (and your
family) want, and are less likely to compromise. When buying for your own use,
it is only human nature you will want the best, so that quite often it is at
the top end of your budget (because as my
parents always tell me – you get what you pay for in this world!).
Yet with a buy to let property, if your goal is a higher
rental return – a higher price doesn’t always equate to higher monthly returns
– in fact quite the opposite. Inexpensive Loughborough properties can bring in
bigger monthly returns. Most landlords use the phrase ‘yield’ instead of
monthly return. To calculate the yield on a buy to let property one basically takes
the monthly rent, multiplies it by 12 to get the annual rent and then divides
it by the value of the property.
This means, if one increases the value of the property using
this calculation, the subsequent yield drops. Or to put it another way, if a Loughborough
buy to let landlord has the decision of two properties that create the same amount
of monthly rent, the landlord can increase their rental yield by selecting the lower
priced property.
To give you an idea of the sort of returns in Loughborough...
|
Loughborough
Property type
|
Average
Price paid (last 12 months) in Loughborough
|
Average
Rent Achieved in last 12 months in Loughborough
|
Lower
End of Yield Range in Loughborough
|
Average Yield in Loughborough
|
Upper
End of Yield range in Loughborough
|
|
Detached
|
£318,379
|
£1,519
|
4.35%
|
5.73%
|
6.57%
|
|
Semi-Detached
|
£186,030
|
£983
|
5.48%
|
6.34%
|
8.16%
|
|
Terraced
|
£152,059
|
£932
|
6.12%
|
7.36%
|
10.27%
|
|
Flats
|
£117,765
|
£681
|
5.56%
|
6.94%
|
7.89%
|
Now of course
these are averages and there will always be properties outside the lower and
upper ranges in yields: they are a fair representation of the gross yields you
can expect in the Loughborough area.
As we move forward, with the total amount of buy to let
mortgages amounting to £199,310,614,000 in the country, landlords need to be
aware of the investment performance of their property, especially in the era of
tax increases and tax relief reductions. Landlords are looking to maximise
their yield - and are doing so by buying cheaper properties.
However, before everyone in Loughborough starts selling their
upmarket properties and buying cheap ones, yield isn’t the only factor when
deciding on what Loughborough buy to let property to buy. Void periods (i.e. the time when there isn’t
a tenant in the property between tenancies) are an important factor and those
properties at the cheaper end of the rental spectrum can suffer higher void
periods too. Apartments can also have service charges and ground rents that
aren’t accounted for in these gross yields. Landlords can also make money if
the value of the property goes up and for those Loughborough landlords who are
looking for capital growth, an altered investment strategy may be required.
In Loughborough, for example, over the last 20 years, this
is how the average price paid for the four different types of Loughborough
property have changed…
·
Loughborough Detached Properties have increased
in value by 213.8%
·
Loughborough Semi-Detached Properties have
increased in value by 237.5%
·
Loughborough Terraced Properties have increased
in value by 258.5%
·
Loughborough Apartments have increased in value
by 236.4%
It is very much a balancing act of yield, capital growth and
void periods when buying in Loughborough. Every landlord’s investment strategy
is unique to them. If you would like a fresh pair of eyes to look at your
portfolio, be you a private landlord that doesn’t use a letting agent or a
landlord that uses one of my competitors – then feel free to drop in, phone or email and let’s talk! What have you got to lose?
If you would like to discuss the Loughborough property market or chat about any potential investment please feel free to call us on 01509 260777 or email
me james.loughborough@belvoir.co.uk
me james.loughborough@belvoir.co.uk
Comments
Post a comment