Surprisingly I’ve had a really busy few weeks since the general election, meeting with new property investors looking to get into the Buy to Let market. When I sit down with the investors it is so important to look at what the investor wants from their investment, how long they are looking to invest and when they are looking to exit the market. It’s important to have a balanced portfolio just like you would do with any other investment.
You can get this balance from buying some properties with high yields (this is calculated by £monthly rent *12 /£ cost of property. This then gives you the % yield) compared with properties that increase in value much quicker these are what we call capital growth properties. Both investments are risky as property can go up as well as down. Another consideration is whether you buy in a town or a village. In previous posts I have looked at whether Crewe and Nantwich are good areas to invest in now I thought I would look at one of the villages. Property prices generally are higher than in Crewe town centre so it will depend on how much money you have to invest and why you are trying to achieve. Choosing the right village is important as demand can be less if there aren’t any schools, bus links, shops etc. You can investigate yourself to see how many properties are going up for rent and the time it takes to let. If there are some ‘To Let’ signs and more ‘Let by’ signs that will give you a good indication that demand is high and would be a good place to buy for rent.
I thought I would look at Willaston village situated between Crewe and Nantwich the average asking price of properties currently on the market is £265,530 and average asking rent of £927 per month. This makes the average yield a disappointing 4% a year……you might as well keep your money in the bank!
So does that mean you should stay clear of buying a property in Willaston as a buy to let investment? Before I can answer that you must consider the capital growth v’s the yield question. Some local landlords often make the mistake of choosing yield over capital growth and believe that by chasing high yielding properties in say the poorer areas of crewe, they will make a faster profit than waiting for capital growth.
The problem with this is that to achieve a high yield you generally have to compromise on the capital growth. So why not find a high yielding property in a strong capital growth area? That seems the most logical thing to do right? Well these properties are incredibly rare. The norm is the lower the capital growth the higher the yield and the lower the yield the higher the capital growth. So buying property is about balancing the two.
If we look back over the last year at property values in Willaston, Nantwich properties have increased by 8.10% whilst in Crewe properties have increased on average by 2.35% clearly this shows that in Willaston, capital growth is worth more consideration than a high yield.
It just shows that you need to look at the bigger picture when deciding why and where to buy your next buy to let property.
If you are thinking of buying a property to rent and would like to discuss your thoughts with me then feel free to give me a call on 01270 661395.