I was at a recent networking event in Bristol, when a landlord asked my opinion on where the next hot spot town or city in the UK is to invest his money. Now, it can be tempting to just look at Bristol 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 know of my love of the ‘buy to let seesaw’. On one side of the seesaw is the rental yield and the other capital growth. Landlords should be looking for a high rental yield 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 areas as Filton in Bristol, (so the seesaw arm with rental yield on it goes up on one side), will suffer from lower capital growth (so the other arm with capital growth on the seesaw goes down). The relationship works in reverse as well, so in such upmarket areas as Henleaze and Stoke Bishop, 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 rental yields. The average rental yield in Bristol today is 4.35%, 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 Bristol landlords are achieving 6% to 7% on some of their Bristol properties, but at the expense of capital growth. Anyway, after wasting a tank fulls of petrol up the A1 to Hartlepool or the M5/M6 to Liverpool, the 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. Since 1995, property values in Bristol have risen by 292.47%, 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.
At the end of the day, as a Bristol landlord, you want to be making gains from both your rent and house price growth, particularly when you want to sell, because when combined, it is the rental yield and capital growth that gives you the real return on your investment.
Feel free to pop into our office on Whiteladies Road or send me an email on firstname.lastname@example.org if you would like a chat about the Bristol property market. Alternatively, visit my Bristol Property Blog at www.bristolpropertyblog.co.uk for daily updates on the places in Bristol to consider for your next buy to let investment.