Posts with tag: rental yield

Romford Knocks Luton off the Top Buy-to-Let Locations

Published On: February 23, 2017 at 9:28 am

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Romford Knocks Luton off the Top Buy-to-Let Locations

Romford Knocks Luton off the Top Buy-to-Let Locations

Romford has knocked Luton off the number one spot in LendInvest’s rankings of the top buy-to-let locations in England and Wales.

The UK’s leading online property lending and investing business has released its latest quarterly research index on the top buy-to-let locations.

The LendInvest Buy-to-Let Index ranks each postcode area around England and Wales to find the top buy-to-let locations. The ranking is based on a combination of four critical metrics: Capital value growth, transaction volumes, rental yield and rent price growth.

Romford in east London has taken the top spot, climbing six places thanks to an 8% jump in rent price growth.

Northampton remains the only postcode in the top ten to be located outside the South East, while Stevenage ranked tenth overall, despite recording the highest rent price growth, at 10.2%.

The Co-Founder and CEO of LendInvest, Christian Faes, comments: “Consistency is clear here: suburban parts of the South East of England continue to offer the best opportunities for investors, while inner London continues to underperform.

“The absence of a large shake-up in the top ten buy-to-let postcodes this quarter shows some stability in the market following a year of market-moving uncertainty and geopolitical shocks. This can only be good news for property professionals; there is nothing to wait for to start investing, renovating and building.”

He advises: “Landlords and investors must remember that considering rental yield isn’t enough; it’s critical to find a property that impresses across all metrics. In the quarter ahead, we’ll be watching closely a number of areas that could edge towards the top ten, like Bristol (ranked 15th), Milton Keynes (16th) and Manchester (21st).”

The top buy-to-let locations 

Position

Location Average rental yield Average capital gain Average rent price growth

Transaction volume growth

1 Romford 5.24% 16.55% 8.33% -7.84%
2 Luton 4.73% 15.19% 7.94% -6.06%
3 Dartford 4.74% 17.75% 6.25% -12.44%
4 Rochester 4.71% 13.96% 6.94% -7.09%
5 Watford 4.24% 17.17% 6.36% -15.78%
6 Enfield 4.60% 16.97% 4.53% -11.97%
7 Southend-on-Sea 4.50% 14.41% 5.95% -9.40%
8 Northampton 4.77% 8.11% 8.33% 0.85%
9 Colchester 4.44% 12.21% 4.38% -2.61%
10 Stevenage 4.06% 9.39% 10.20% -11.00%

The worst buy-to-let locations 

Position

Location Average rental yield Average capital gain Average rent price growth

Transaction volume growth

1 Galashiels 3.80% -9.57% 0.91% 1.00%
2 Cleveland 4.66% 1.24% -3.51% -11.26%
3 Northwest London 3.82% 5.40% -5.03% -13.01%
4 Carlisle 4.16% 0.61% 0.00% -14.23%
5 Western central London 3.46% 1.50% 4.44% -27.90%
6 Llandrindod Wells 3.49% -1.20% -1.24% 0.57%
7 Hull 4.64% 5.61% -3.51% -11.39%
8 Newcastle upon Tyne 4.74% 1.53% 0.00% -9.30%
9 Llandudno 4.73% 0.77% 0.00% -4.99%
10 Swansea 4.67% 1.24% 0.00% -5.76%

 

Could home staging be a simple way of improving yields?

Published On: January 10, 2017 at 10:34 am

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Could home staging be this year’s simple way to make a property more desirable and deliver a higher rental yield?

Home staging goes past interior design to become a marketing tool to ensure that their rental property appeals to a bigger audience as possible.

There are a lot of measures that can be taken in order to improve the internal makeup of a property: Think furniture, lighting and bedding for example. Making your rental property appear more homely and effectively utilising space will attract more would-be tenants.

Furnishings

However, the furnishing of rental properties has been an afterthought for buy-to-let investors for a number of years. That is the view of Robert Walker, founder and managing director of Alexander James Interiors.

Mr Walker notes: ‘Often let unfurnished or at best, let with the bare minimum of items collected on a quick dash to Ikea, soulless properties have been presented to prospective tenants with the expectation of securing a tenancy.’[1]

Could home staging be a simple way of improving yields?

Could home staging be a simple way of improving yields?

‘With more people than ever living within the private rented sector, the expectations of tenants have never been higher-and that includes not only a safe and functioning home but an appealing interior also,’ he continued.[1]

Walker said that 2017 has been predicted to be an ‘annus horribilis’ for buy-to-let investors, given changes to mortgage interest tax relief and tougher mortgage lending criteria. He feels that savvy landlords should be taking whatever simple steps they can in order to maximise their yields.

Lucrative

‘From a landlords perspective, dressing a rental property can also prove lucrative,’ Walker added. ‘Alexander James Interiors has seen a significant rise in demand from landlords, both individual or accidental landlords and professional, multi-unit landlords, for the furnishing of rental properties over the last 18 months as property owners seek to increase their yields.’[1]

[1] https://www.landlordtoday.co.uk/breaking-news/2017/1/dress-to-impress-to-achieve-a-higher-rental-yield

Gross Annual Rental Yields Now at 17-Month High

Published On: March 18, 2016 at 11:01 am

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Rental yields are showing resistance to soaring property prices, according to the latest Buy-to-Let Index from Your Move and Reeds Rains.

The gross rental yield on the average rental property in England and Wales was 4.8% in February – unchanged from January. On an annual basis, this is slightly lower than the 5% gross rental yield recorded in February last year.

Gross Annual Rental Yields Now at 17-Month High

Gross Annual Rental Yields Now at 17-Month High

Taking into account both rental income and capital growth, a typical landlord in England and Wales has seen total returns of 12.7% over the 12 months to February. This is up from the average 11.7% return for the year to January, representing a 17-month high. The last time that rental yields reached 12.7% was in the 12 months to September 2014.

In absolute terms, the average landlord in England and Wales has made a return of £23,227 in the past year, before any deductions for buy-to-let mortgage payments or property maintenance. Of this sum, the average capital gain accounted for £14,767, while rental income made up £8,460 of the yield.

The Director of Your Move and Reeds Rains, Adrian Gill, explains: “Rising property prices and rising rents are two sides of the same coin. There is not enough supply of housing across the UK to match soaring demand. This is powering a sellers’ purchase market and a landlords’ rental market. Housing costs are rising, and housing wealth is rising – two very different perspectives on the same issue.

“Faced with this dilemma, investment in property is a rational response, and has been proving extremely lucrative for landlords and some homeowners alike. Building more new homes would be an even better response, and where possible is even more profitable. But it is Government inaction preventing more homes being built to fill the gap – just as it is a Government decision to attack those willing to navigate the risk and complexity of property investment.”

He insists: “Until this country builds new homes at the rate needed to match our rising population, property investment and buy-to-let activity will continue to be especially profitable. Even if that never happens, it could take decades of sufficient home building to make up for the decades of undersupply.

“The only caveat is that property investment decisions are becoming more complicated thanks to the plethora of additional regulations and tax changes. These decisions will be harder to make, and the buy-to-let industry will demand a more professional approach to the business of being a landlord. But for those who already own properties, or have the capital to invest, there are opportunities to be found.”1

It is unclear how the market will change after the 3% Stamp Duty surcharge is implemented on 1st April, as it has now been confirmed that large-scale investors will also be hit by the change. Since the start of the year, landlords have been rushing into the market to beat the deadline.

However, research suggests that many investors are now considering leaving the buy-to-let sector.

1 http://www.propertyreporter.co.uk/landlords/gross-annual-rental-yields-hit-17-month-high.html

What is Rental Yield and How is it Calculated?

Published On: November 19, 2014 at 5:01 pm

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The easiest way to work out rental yield is to divide the property’s price by the yearly rent taken.

For example, if a house costs £500,000 and takes £850 in rent a week, the yield is 8.8%.

What is Rental Yield and How is it Calculated?

What is Rental Yield and How is it Calculated?

This is usually the figure mortgage lenders are referring to when they say rental yield. Research in this sector will also generally use this method. However, this number is actually a gross yield, and does not consider the extra costs associated with managing the property.

Landlords looking to receive an income after costs on the property, should be working out a true yield, or yield net of costs.

The mortgage is probably going to be the biggest cost to the landlord. Ongoing payouts for maintenance, insurance, ground rent, service charges and letting agent fees should also be allowed.

Insurance and maintenance can easily eat up 15% of the yearly rent. A letting agent will also take an extra 10%.

Mortgages should be considered, as the majority of landlords have an interest-only loan, where the monthly repayments are lower than ordinary mortgages. If a landlord buys a house for £500,000 with a 40% deposit, and the remainder interest-only rate of 4.5% is borrowed, the costs will be £1,125 a month.

Annual mortgage costs would then be £13,500. Considering the extra 15% for maintenance and insurance, the annual costs now exceed £20,000. If annual rent adds up to £24,000, the true yield is 4.8%.

If letting agent fees are added onto this, the real yield drops to 3.9%. However, this is still an appealing net yield.

Professional landlords are advising aspiring investors that if they calculate net yields in this way, they may result in negative figures.

Despite recent increases in rents, there has been a growth in house prices also, meaning that even gross yields are dropping below 4%.