High Yield Investments 1st Feb 2017
Location is key for buy to let investors. However landlords have a tendency to purchase in areas they are knowledgeable of in terms of property prices, monthly rents and the local amenities that attract tenants to an area. It may well be worth considering unfamiliar territory, especially if you live in one of Scotland’s main cities. Towns on the outskirts frequently enjoy lower property prices, and therefore far higher rental yields.
Before you make any decision on where and what to buy, you need to bear in mind that there are 2 ways in which you can earn from property investment. Capital growth or capital appreciation is the increase in the value of your property over time. Rental income is the rent paid to you monthly by the tenant. If you divide the annual rent into the purchase price of the property, this gives you your yield or annual return. Key points to consider therefore are:
- Expected levels of capital growth
- Expected income streams
- Your personal circumstances and, for example, whether capital growth or income is more important to you
Seek expert advice on expected rental income and capital growth levels from a reputable local letting agent. Your mortgage provider will ask for this information. The Key Place can help you with this.
Investment in buy to let property allows you to make informed decisions on what property to buy, and enables you to keep your money where you can see it. Plus property can pay straight away. If you buy wisely then property can give you an immediate short term income. Yields in areas outside Edinburgh, such as Penicuik, Bo’ness, Falkirk and towns in between can give you yields of 6-8%, which is far more than you would get if you put your money in a savings account. Not only that, but property can give you long term returns on your investment. It is well documented that property outperforms all other main asset classes over the long term. Monies invested in 1996 would have grown two decades later by 292% in government bonds, 308% in the stock market, 479% in property and 1,305% in property leveraged with mortgage borrowing.
Owning property gives flexibility as to whether you use some of the income or equity at any time you need it, rather than it being locked away in a pension scheme with set rules as to when you can access your money. When thinking about where to invest, low risk investment areas are generally the more desirable parts of town, and will give you yields of around 4-6%. If you are willing to take more of a risk, then areas that are less desirable can give you yields of 6-7% per annum. And for annual yields of 8% and over, there are plenty of opportunities on the market, although these will typically be in the poorer areas of towns.
The Key Place is market orientated and, for buy to let landlords, can offer information and advice on how much properties are worth and where your next buy to let opportunity could come from. Check out the following blogs for vital buy to let information and opportunities:
If you would like advice about investing in local markets, wish to enquire about The Key Place Investment Analysis Reports, Property Sourcing, Residential Lettings or Property Management services, please do not hesitate to contact us now.