Could buy-to-let property in Derby be your nest egg investment?

My recent articles giving an insight into the Derby property market are producing more and more emails and an increasing number of people popping into my offices for a chat about investing in buy to let.

Many people in our part of Derbyshire, over the last few years, have seen the buy to let market become all about nest egg investment. It is fuelled by pitiful interest rates on building society savings. It reflects the fact that building society savings accounts are paying half a per cent interest and pension returns are struggling to match expectations, turning more and more people into landlords to secure their future.

To get anywhere near a savings rate of 4%, you have to tie your money up for 10 years. Now, personally, if I was tying my money up for that length of time, I would want a better return and more control.
So what can you expect from your rental   property investment?

In the short term, rental yields are important, and in Derby, the average annual yield is in the order of 3.44% per year. However, that is based on averages, and as most landlords in Derby tend to buy starter home homes, apartments and terraced houses, the majority of which are achieving 4.5% to 6.2% per year depending on location and price in the City.

If you have read some of my previous articles on property bargain hunting in Derby, you can achieve rental returns of nearer 7%!

In the long term though, the question of  capital growth is as important, if not more important (because if you have great short term yields, but the value of the property doesn't keep up with the rest of the market, you will have an asset that in real terms is dropping).

As we mentioned in a previous article, average property values in Derby currently stand at £170,300. Property values in Derby have risen by 9.65% in the last 5 years. On the other hand, property investment is a long term game, so I wanted to share with you the research I did for a couple of Derby landlords. Roll the clock back 10 years to 2004, the  average value of a property in Derby was £146,100. 15 years to 1999 makes interesting reading, as the average Derby property value was only £65,600, 30 years makes it £28,200 and just for a bit of fun, we looked at 1974 at it was £10,050!

However, if one looks at say a 30 year investment period, if you had put £28,200 into the stock market in 1984 instead of buying a house in Derby, your shares today would be worth £134,690. Put the same £28,200 money in a Building Society account and you reinvested the interest back into the account, and your Building Society passbook would have £158,070.

Compare that with the property market in Derby and the property would be worth £170,300 today. Not much difference to the building society until you realise that with the rental property you would have received in excess of £108,000 in rent over those 30 years, which you wouldn't have received with the Building Society account!

When it comes to investing in and letting out property, it is so important to do your sums and your research before taking the plunge. As the saying goes; if it was easy, everyone would be doing it!
Please give me a call or call in and see me to discuss any aspect of letting or buying       investment property.

If you would like to discuss anything further then please pop in and see me, send me an email or call me directly on 07977 235545.

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