The Arleston property market
outperforms Red Lake by 100%
Had a conversation with a landlord who
lives in Red Lake, he took me up on the offer of an informal chat about the Telford
property market the other week after reading the ‘Telford Property Blog’. We
got talking about investing in property and how different areas of Telford performed
against each other.
Investing
in Telford property is a balancing act between capital growth and yield. On the
one hand going for strong capital growth seems an obvious choice because of the
potential to generate long term capital profit, especially with inflation
eating away at our savings. However, rental yields on high capital growth
properties tend to be lower meaning if you are taking a high percentage
mortgage, the rent doesn’t pay the mortgage payments.
It
became really interesting when we compared his area of Red Lake against Arleston,
where he was brought up in the 1950’s. Property in Red Lake have an average
value of £201,100 and rent for £630 per month. This would give our landlord a gross
yield of 3.76% per year. Now consider those ex-local authority 3 bed semis in Arleston,
which sell for around £86,700 and let, depending upon condition for around £543
per month, a gross yield of 7.51% per year, which is double the yield (i.e. 100%
proportionally higher yield).
However,
like I said a few weeks ago, yields are not everything in property investment. Another
point to consider is how the value of the property goes up over time. Better
properties in better locations don’t have the best yields, but their property
values tend to go up quicker over the long term. The average values of 3 bed
semis in Arleston have grown from £43,300 in 1999 to £86,700 in 2014.
However,
in the Red Lake, average values have risen by 123.1% since 1999. Percentages
don’t tell the whole story though. An average homeowner in Arleston, selling their
property today would make a gain of around £43,400, (assuming they owned it
from 1999) a home owner in Red Lake would, on average, have made and impressive
£106,100 gain.
Now, I
know there aren’t many landlords that would consider a 4 bed in Red Lake to
rent out, but it is important when purchasing a buy-to-let property that you
choose one which will rent well, and for long periods of time.
Looking
at the Telford property market in depth enables me to give you the best advice
and opinion, so if you would like any advice on choosing properties, please
come and see me at our office at Grays in Forgegate in Telford or email me on martin@letwithsignature.co.uk
.
