|Capital growth or rental increases? Lets go for both!|
Medway Buy to Let market saw returns of 13.88% in 2015
Although only a couple of months into 2016, I remember that a few days before Christmas, I got chatting with one of my out of town landlords who was back in Medway visiting his family. Brought up in Medway, he went to the Chatham Grammar School for boys, back in the 1970’s and is now a University Lecturer in central London. To enhance his retirement, he has a small portfolio of four properties in the borough and wanted my advice on where to buy the next property in Medway. He lives in a college owned flat and would never dream of buying where he lives in Kensington as the average value of a flat is £1.62m and house £4.1m. Eye-watering to say the least!
Before I could advise him, I reminded him that the most important thing when considering investing in property is finding a Medway property with decent rental yields for income returns, yet at the same time, it must have the potential for capital growth. In 2016, Medway landlords will be under more pressure to find the best permutation of yields and capital growth, as extra stamp duty charges for buying properties and a squeeze on mortgage interest relief will raise their costs.
However, (you knew there would be a however) before we look at yield and capital growth, one important consideration that often many landlords tend to overlook, is the propensity of how likely the rent will increase. Interestingly, the average rent of a Medway property currently stands at £860 per month, which is a rise of 6.0% compared to twelve months ago ,although it should be noted this rise in rents is for new tenancies and not existing tenants.
Anyway, back to yield and capital growth. The average value of a Medway property currently stands at £251,300, meaning the average yield stands at 4.11% per annum, which on the face of it, many landlords would find disappointing. That is the problem with averages, so if I were to look at, say, 2 bed houses in Medway which are the sort of properties a lot of landlords buy, in Medway, the average value of a 2 bed house is £179,900, whilst the average rent for a 2 bed house is £821 per month, giving a yield of 5.48%. However, if that wasn’t high enough, there are landlords in Medway who own some specialist properties with specialist tenancies, that are achieving nearly double that yield – again it comes down to your attitude to risk and reward (give me a call or drop me an email if you wanted a chat about those sorts of properties – although they can be fun and games!).
Ultimately investors want to be making gains from both rent and house price growth. When combined, the rental yield and capital growth gives you the return on investment, and that is what I told our University friend from Kensington. Return on investment is everything. So as property values in Medway have risen in the last year by 8.4% …. this means the current annual return on investment in Medway for a typical 2 bed house is 13.88% a year .... not bad.
Whether you are a soon to be new landlord or existing seasoned landlord in Medway, you might be interested in my blog about the Medway Property market, where you will find similar articles to this one about what is happening in the Medway Property market .... the web address is
www.medwaypropertyblog.com. And so to answer the question on what he should buy, well on the same blog, once or twice a week, I post what I consider to be the best buy to let deals in Medway, irrespective of which agent it is being marketed with. Maybe you should keep a regular check on my blog?