Investing in Derby – Should you look further afield?

I was at a recent business networking event in Derby, when a landlord who already owned a couple of properties, bent my ear on where the next hot spot town or city is to invest his money in and where the best rental yields are. Now it can be tempting to just look at Derby 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.

Now regular readers of my articles of the Derby Property Blog know of my love of the ‘buy to let seesaw’. On one side of the seesaw is return and the other, capital growth. Landlords should be looking for a high rental 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 such areas as the Pear Tree area in Derby - sees the seesaw return arm go up - will suffer from low capital growth - so the capital growth arm goes down.  The relationship works in reverse as well, so in such areas as Littleover, properties offer good capital growth, but at the expense of a decent yield.

  

The North East and North West of the UK are landlord magnets for great yields. The average yield in Derby today is around 4.64%, 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 Derby landlords are achieving 6% to 7% on some of their Derby properties, but 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 Liverpool property, would have dropped in value by 2.2% in the last 12 months and the Hartlepool property would have dropped 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 Derby have risen by 142.6%, compared with Hartlepool at 21.02% and Liverpool at 90.11% – it just shows you shouldn’t always chase the yield because of the poor increases in property values in those two places.

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 Derby 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 return and capital growth, that gives you the real return on your investment. 

Finally, do you know Hartlepool and Liverpool as well you know Derby? 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 property closer to home?

If you want to get in touch you can email me by clicking on the link below:

simonj@professionalproperties.co.uk

Or you can give me a call on the mobile:

07977 235545