Surely there are better places for buy-to-let than Burton?

Whilst attending a recent business networking event in Burton recently, a landlord, who it transpired had a couple of buy to let properties, bent my ear on where the next hot spot town or city is to invest his money in and where the best rental returns are.

Now it can be tempting to just look at Burton when growing a buy to let property portfolio, but there can be big differences in the amount of rental income you receive and how much your property will appreciate by considering other locations in the country.

Regular readers of my articles in the Burton Property Blog know of my love of the ‘buy to let seesaw’. On one side of the seesaw is the rental return and the other side, capital growth. Landlords should be looking for a high return so that they can comfortably cover any mortgage payments and make some profit from the income return, but you also want the property to rise in value over time so you can get some capital growth when you come to sell. However, high yielding property in say such areas as the Waterside area in Burton, see the return side of the seesaw go up, will suffer from low capital growth and so the other side of the seesaw goes down. The relationship works in reverse as well, so in areas such as Rolleston, properties offer good capital growth, but at the expense of a higher yield.

  

The North East and North West of the UK are landlord magnets for great yields. The average yield in Burton today is 4.02%, which when you compare with say Hartlepool in the North East, which achieves 7.73% or 9.43% in the Anfield area of Liverpool, doesn’t look too healthy. Now of course, these are only averages and some of my Burton landlords are achieving 6% to 7% on some of their Burton properties, however, sometimes at the expense of capital growth. Anyway, after wasting a tank full of petrol up the A1 to Teeside or the M1 to Stanley Park, that high yielding Liverpool property would have dropped in value by 2.2% in the last 12 months and the Hartlepool property, by 1.4%.

When you compare the long term house price growth, it gets even worse! Looking at the graph, since 1995, property values in Burton have risen by 133.79%, compared with Hartlepool at just 21.02% and Liverpool at 90.11% – it just shows that you shouldn’t always chase the returns. As I always like to explain to landlords when they either email me, pick up the phone or pop into my offices for a coffee, a decent yield is important, but when you come to sell your buy to let property it would also be nice to make a decent profit.

At the end of the day, as a Burton landlord, you want to be making gains from both your rent and house price growth, particularly when you want to sell, because when combined, the rental yield and capital growth, that gives you the real return on your investment. Finally, do you know Hartlepool and Liverpool as well you know Burton? Do you know where the good and bad areas are in both those places? Are you happy that it would require you to take a day out of work if there was an issue with your property in the North? If you can’t answer yes to all three questions, then maybe you should be considering a closer to home?

Call me on 07973 666229 or pop into our offices on the High Street in Burton!