Should you invest in the villages? Rental returns in Repton are awful!

I have recently been speaking with a number of landlords about the importance of a balanced portfolio when buying and renting out property. We discussed the balance between buying properties that offer good monthly returns but quite often offer poor capital growth and properties that do go up in value quicker but often offer a lower yield.

Another consideration has to be the mix of town properties and village properties. Choosing the right village though is very important. Living in villages often has higher costs, especially transport and petrol costs. Some tenants don't buy because they can't afford the mortgage, so if you buy in the wrong village, you could limit yourself to the type of tenant who can afford those extra transport
costs.

However, one village that has a high demand with tenants is Repton. The village consists of some 1,036 dwellings of different housing types and a population of 2,867 people. With an average property value of £301,200 and average rents in the order of £789 per month, the average yield achieved in Repton are a miserable 3.14% a year .. you might as well put it in the bank!

So, does that mean you should stay clear of buying a property in Repton as a buy to let investment?
Before we can answer that, you must really consider the capital growth vs rental return question. Some Burton buy to let investors often make the mistake of chasing yield over capital growth and believe that by chasing high yielding properties, in say the ‘poorer’areas of Burton, they will make a faster profit than waiting for capital growth.

The problem with this is that to achieve high yield you usually have to compromise on capital growth. Therefore it would seem the most logical solution is to find a high yielding property in a strong capital growth area but, these simply don't exist and in actual fact, most of the time, lower yielding properties have a better capital growth. This is because there is generally a contrary relationship between yield and capital growth so the higher the yield, the lower the capital growth and the higher the capital growth, the lower the yield. Property investment in Burton is about balancing the two.

A few weeks ago, I said property values in Burton were 6.5% below the 2007 property boom, but here is the interesting news, in Repton they are 7.3% above the 2007 boom prices.. this means if you had bought an ‘average’ property in Repton as opposed to Burton back in 2007, whilst your yields would have been low, in terms of the value of the property, you would be £36,600 better off.

It just shows you need to look at the bigger picture when deciding what and where to buy your next buy to let property and I hope I have made all the property owners in Repton very happy after reading this!

I will always give all landlords my unbiased opinion on what to buy and not buy. I pride myself by knowing the market with all its ups and downs, so I can give some great advice and opinion. It might not be what you want to hear but, I can assure you, it is what you need to hear!

If you would like to discuss my thoughts on the rental market, feel free to pop through the door of our offices on the High Street, call me on 07973 666229 or send me an email to: davidm@professionalproperties.co.uk

      

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