Buying to let in the villages? Rental returns in Duffield 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. The balance between buying properties that offer good monthly returns (high yields) but quite often offer poor capital growth (i.e they don't increase in value that much over the years compared with the average) verses properties that do go up in value quicker but often offer a  lower yield. Another consideration has to be the mix of town properties verses the villages.

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 Duffield and is particularly popular because of the successful secondary school, Ecclesbourne. The village consists of some 2,028 dwellings of different housing types and a population of 4,986 people.

With an average property value of £347,900 and average rents in the order of £831 per month, the average yield achieved in Duffield are miserable 2.86% a year.. you might as well put it in the bank!

So, does that mean you should stay clear of buying a property in Duffield as a buy to let investment ? Before I can answer that, you must really consider the capital growth vs yield question. Some Derby 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 parts of Derby, 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 Derby is about balancing the two.

A few weeks ago, I said property values in Derby were 8% below the 2007 property boom, but here is the interesting news, in Duffield they are 9.35% above the 2007 boom prices.. this means if you had bought an average property in Duffield as opposed to Derby back in 2007, whilst your yields would have been low, in terms of the value of the property, you would be £51,500 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 Duffield very happy after reading this!

If you would like to discuss my thoughts on the rental market, feel free to pop through the door of our offices on St. James Street, call me on 07977 235545 or send me an email to:    

As always, as I don’t sell property, if you want a chat about what (or not)

to buy in the Derby property market, email me the property link from Rightmove to my email address and I will give you my honest opinion.

      

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