Well, as the sands of winter begin to trickle
through the hour glass of life, a few days ago I got chatting with one of my
out of town landlords who was back in Bo’ness visiting his family. Brought up
in Bo’ness, he went to the Bo’ness Academy back in the 1970’s and is now a
University Lecturer in central London. For his retirement, he has a small
portfolio of four properties in Bo’ness and wanted my advice on where to buy his
next property in Bo’ness (as he lives in a college owned flat and, anyway,
would never dream of buying where he lives in Kensington where the average
value of a flat is £1.62m and a town house £4.1m. Eye-watering!).
Before I
could advise him, I reminded him that the most important thing when considering
investing in property is finding a Bo’ness property with decent rental yields
for income returns yet, at the same time, it must have the potential for
capital growth from rising house prices over time. As I have discussed before, Bo’ness
landlords are under a wee bit of more pressure at the moment to find the
best permutation of yields and capital growth, as extra LBTT charges (the old
stamp duty to you and me!) 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 Bo’ness property currently stands at £455 per month, which is a rise of 6.3%
compared to twelve months ago (although it must 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 Bo’ness
property currently stands at £135,201, meaning the average yield stands at 4.0%
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 house in Bo’ness
which are the sort of properties a lot of landlords buy, the average value
of a 2 bed house is £88,033, whilst the average rent for a 2 bed house is
£499 per month, giving a yield of 6.8%. However, if that wasn’t high enough,
there are landlords in Bo’ness who own some specialist properties with
specialist tenancies that are achieving yields of more than 8% – again it comes
down to your attitude to risk and reward (give me a tinkle 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 that is what I told my University friend from Kensington. Return on
investment is everything. So, looking at property values in Bo’ness, they have
risen in the last year by 3.5% .... which means the current annual return on
investment in Bo’ness for a typical 2 bed house is 9.8% a year .... not
bad!
If you
would like a chat to find out more about investment property and property
management in Bo’ness please pick up the phone (01506 828096) or pop into the
office (19 Main Street, Bo’ness) for a chat or email me (news@thekeyplace.co.uk).
No comments:
Post a Comment