Most of the investors we talk to have a predetermined view of the rental income they want from a property.
The following shows the typical feedback we get with regards to the rental yield they are happy with:
- It isn’t that important as the focus is on capital growth (2.5%)
- The important thing is a steady but still attractive income from a sector and location they know (5%)
- The higher the yield the better as long as they don’t have to manage the property themselves (7.5% plus)
The key to avoiding disappointment later is to identify at the outset what the requirement is and then follow the five rights of successful property investment.
a) Capital growth – 2.5% net
If you want capital growth from the UK market and are prepared to accept a low yield (2.5% or less), then it would be a brave man who bets against London outperforming the rest of the country over the longer term.
b) 5% net
Studio apartments and traditional houses in the northwest let to families can show yields of 4%-6%.
There is strong demand for both types of properties and they are relatively easy to manage.
There are lots to choose from so the key is to use the right developer/advisor.
c) 7.5% plus net
In the residential sector, HMO (houses in multiple occupation) properties will show this yield.
Having multiple tenants with some shared facilities enhances the yield. However, it does mean good quality management of the property is needed if it is to be a trouble-free investment.
When all expenses are included, a real net yield of 7.5% plus should be achieved.
Most investors are not familiar with the HMO sector and it is easy to get carried away with the yields that some vendors say they are getting.
This is a great sector to invest in if you want an attractive and secure income, but you have to trust your developer/advisor and its property management team.
A, B, or C?
Our focus is on income-producing properties that will show capital growth in line with the general market.
Given the yields in London, we are not currently developing there so we can’t help if you choose option A.
If you are looking for a 5% or 7.5% plus net yield, options B and C, then you may consider northwest where we can offer such yields.
The first step is to decide on the options that you are most comfortable with.
The next step is to get in touch with the right developer/advisor…
