I was approached by a landlord last week who has a couple of Buy to Let properties, following our previous articles. He was keen to know where the next hot spot town or city is to invest his money in and where the best rental yields were. Now it can be tempting to just look at Epsom when growing a Buy to Let property portfolio, but there can be big differences in the amount of rental income (annual yield) you receive and how much your property will appreciate (capital growth) by considering other locations in the country.
Now regular readers of my articles of the Epsom Property Blog know of my love of the ‘Buy to Let
seesaw’. On one side of the seesaw are 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 say such
areas as the Longmead Estate in Epsom, (so the seesaw arm with yield on it goes up on one side),
will suffer from low 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 the College area of Epsom,
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
Epsom today is 3.98%, 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 Epsom landlords are achieving 5% to 6.5% on some of their
Epsom properties, but at the expense of capital growth. Anyway, after wasting a tank full of petrol
up the A1 to Teeside or the M1/M6 to the Home of the ‘The Reds’, 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 Epsom 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, whether
current, future or even using a different agent, 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 an Epsom 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. If you want to know what
(and would not) make a decent property to buy in Epsom for buy to let, then one place for such
information is here at the Epsom Property Blog or by emailing me at