Unless you
get phenomenally lucky, you cannot have your cake and eat it! There’s a general
rule that the better the area you buy in (say Barrowby Gate, Gonerby Hill Foot
etc etc), the lower the return you’ll get. This is because you’ll have to pay
more to buy property in a nice area, and the amount of rent you’ll get doesn’t
rise at the same level. Buying in a less plush area (Earlesfield, Queensway
etc) doesn’t mean a property won’t rent, but it does have a bearing on the type
of tenant you are likely to attract.
Different
landlords value different things – some prefer to accept a modest yield (the
monthly return) on their rental investment, in return for more certainty regarding
tenant quality. Others are simply more interested in high returns. Before you
start out, it’s a good idea to be honest about what would work, or more
importantly what wouldn’t work for you. This will then enable you to filter
much more easily..
Better Area, Lower Return
The most
expensive 3 bed houses are in the new build areas on the outskirts of town.
Because
you pay more for these to start off with, the return is never as good. Some
landlords
prefer this because of the ‘comfort factor’ of owning in these areas. Paying
£160k to £170k gets you a 3 bed detached house, which will let for £650 to £670
per month, a lowish yield of 4.8%. Maybe the 3 bed semi, which will cost you
£130k to £135k and a rent of £625K(tops) gives the same safety factor, but a
better yield of 5.6%
Middling Area, Average Return
Grantham
has a town centre of Victorian Terraced properties, taking in places like Cambridge/College/Oxford
Street’s, Victoria / Stamford Street, Dudley Road area, New Street / Redcross
Street areas to name but a few. This is staple rental territory - there’s always
good demand here from private tenants. Three bed terraced houses can be bought for
£85,000 to £90,000 and with rents of £450 per month (depending on condition) ,
that’s a nice yield of 6.2%
Cheaper Area, Higher Return
If you
want your money to work as hard as it can, you need to get into some of the
less expensive areas of town. Much of the Earlesfield falls into this category,
together with areas like Queensway and Brittain Drive. I know someone who has
bought a one bed flat on Shaw Road (back of Northern Foods) for £50,000
recently. Done up, it should rent for the early £300’s a month, giving a yield
of 7.7%
