The mindset and tactics you employ to buy your first Rotherham buy-to-let property needs to be different to the tactics and methodology of buying a home for yourself to live in.
The main difference is when purchasing your own property, you may well pay a little more to get the home you (and your family) want, and are less likely to compromise. When buying for your own use, it is only human nature you will want the best, so that quite often it is at the top end of your budget (because as my parents always used to tell me – you get what you pay for in this world!)
Yet with a buy-to-let property, if your goal is a higher rental return you must be aware that a higher price doesn’t always equate to higher monthly returns – in fact quite the opposite. Instead, inexpensive Rotherham properties can bring in bigger monthly returns.
Most landlords use the phrase ‘yield’ instead of monthly return. To calculate the yield on a buy-to-let property take the monthly rent, multiply it by 12 to get the annual rent and then divide it by the value of the property.
As a result, if the price of a property is more, the yield will drop. To put it another way, if a buy-to-let landlord here in Rotherham has to decide between two properties that will generate the same monthly rent, the landlord can increase their rental yield by selecting the lower priced property.
What is the average yield for Rotherham properties?
To give you an idea of the sort of returns in Rotherham…
Now of course these are averages and there will always be properties outside the lower and upper ranges in yields… however, they are a fair representation of the gross yields you can expect in the Rotherham area.
As we move forward, with the total amount of buy-to-let mortgages amounting to £199,310,614,000 in the country, landlords need to be aware of the investment performance of their property, especially in the era of tax increases and tax relief reductions. Landlords are looking to maximise their yield – and are doing so by buying cheaper properties.
Other factors can impact your choice of buy-to-let property
However, before everyone in Rotherham starts selling their upmarket properties and buying cheap ones, yield isn’t the only factor when deciding on what Rotherham buy-to-let property to buy.
Void periods (i.e. the time when there isn’t a tenant in the property between tenancies) are an important factor and those properties at the cheaper end of the rental spectrum can suffer higher void periods too. Apartments can also have service charges and ground rents that aren’t accounted for in these gross yields.
Another way landlords can make money is if the value of the property goes up. Therefore, for those Rotherham landlords who are looking for capital growth, an altered investment strategy may be required.
In Rotherham, for example, over the last 20 years, this is how the average price paid for the four different types of Rotherham property have changed…
- Rotherham Detached Properties have increased in value by 224.7%
- Rotherham Semi-Detached Properties have increased in value by 231.2%
- Rotherham Terraced Properties have increased in value by 213.8%
- Rotherham Apartments have increased in value by 228.3%
A balancing act
It is very much a balancing act of yield, capital growth and void periods when buying in Rotherham.
Every landlord’s investment strategy is unique to them. If you would like a fresh pair of eyes to look at your portfolio, whether you’re a private landlord that doesn’t use a letting agent or a landlord that uses one of my competitors – then feel free to drop in and let’s have a chat. What have you got to lose? 30 minutes and I’ll make you a cup of tea!
Get in touch with me today using the contact page!