One of our portfolio landlords popped in to see me the other day. They own a few properties in Broseley, a mixture of new builds and ex local authority houses. I have previously discussed that Broseley is typically more expensive to purchase than some areas in Telford. Clearly, there are valid reasons behind why house prices vary from one area to another. As a result of the difference in purchase prices, they would like to vary their portfolio and look at a different area for their next buy to let investment.
Just over the river, a similar town to Broseley, lies Madeley. I wanted to compare 1960s ex-local authority properties in Broseley, Wilkinson Avenue in particular, to those of properties in Woodside, also, ex local authority.
In previous articles, we have found that ex-council properties can achieve good annual yields of around 7-9%. Their average value tends to stay quite stable when we compare this to the average capital growth on the more modern estates.
This particular landlord is not necessarily looking for capital growth. They would prefer to have a strong yield. The rest of their portfolio is performing well overall; therefore they would prefer something which is going to provide a strong 8-9%. Rental Income is the main drive behind the next investment.
In my opinion adding one or two strong yielding properties to your portfolio isn’t a bad thing. Typically, you do find that a strong yielding property comes with its headaches. With risk comes return. Managed well, I don’t think it has to be that risky.
In October 2015, a 3-bed mid terrace, with parking, on Westbourne, Woodside sold for just £70,000. Similar properties let for around £550 pcm. That’s an incredible 9.4% gross rental yield. Most of the sales in Woodside over the past year were terraced properties which on average sold for £82,599.
The most recent property to sold (subject to contract) on Wilkinson Avenue, Broseley, was on the market for £116,950. This property is also a 3-bed mid terrace, with parking. You could typically achieve around £595 for this type of property in Broseley. Still a respectable 6.1% yield, however the property in Woodside required far lower capital outlay.
On the flip side, if this landlord felt capital growth was important, Wilkinson Avenue, Broseley performed well between 2011 and 2015. Property prices in some cases on the estate have increased by up to 22%.
Whilst Woodside provides a much stronger rental yield, the capital growth over the same period appears to be relatively stagnant. In 2008 house prices in Woodside averaged at £96,283! Based on the past years sales that’s 8% lower than they were seven years ago.
We are constantly reviewing the local market. If you would like some advice about buying to let, please come and see us at our offices.