A landlord, Mr Shiraz, who owned a few properties in the Croydon area popped into the office last week, loaded with a few questions, one of them being…
‘… investors / speakers at the networking events I go to seem to be under the impression that investing ‘up North’ is the best place to invest, as you will get higher yields up there, as properties are cheaper. What do you think about this and would you advise that I sell my investment properties in Croydon to re-invest in somewhere like Manchester or Blackpool… ?’
That’s a fantastic question isn’t it! And one that I have infact never written about… My thoughts are quite simple on this topic, and I understand that everyone will have their different opinions on this matter. I am happy to share mine, if you want to share yours too, please feel free to in the comments box below…
Let’s use Blackpool as the example.
Here is the bottom line… properties up North will most likely get you a better return on your money in terms of rental yield per month. Naturally (in the right areas such as Blackpool etc), you can easily achieve a yield of 8% and higher. Of-course rental income is relative also, you will be asking for less rent in Blackpool, and you will have spent less money buying the property also, in comparison to somewhere like Croydon.
Now, I strongly believe, as a small time investor (under 10 units), you should KNOW your area like the back of your hand before you invest in it. By ‘know it’ I mean… you, the investor, should be able to tell even me, the local Croydon property guru 😉 what properties are worth in East Croydon vs South Croydon vs Thornton Heath vs near Purley Station vs Sanderstead Station etc. You should know which road leads to where, and WHY this is a good spot to invest. Like with anything, I believe that you should be in control of what you are doing. It doesn’t take long to understand a town, but you do need to be able to visit it easily. People who you may be able to trust in helping you make a sound investment could be one of the following:
- Your long standing business partner who you have made success with in the past
- A local person who knows the area better than anyone else
- And that’s about it really…
Even then, I strongly believe you should know the area yourself. Do you know the different in the quality of tenant typically found in West Croydon vs East Croydon? It’s a different demographic with completely different age groups and family sizes etc. Factors like this, in my opinion, as so essential to having a heathy landlord life. You wouldn’t want to buy a studio flat in an area which is populated with families with kids. It’s just not a good idea…
Would I invest up North now… No.
Now, the original question was ‘should I sell my properties in Croydon to invest up north?’
Again, my answer was a straight, NO. Mr Shiraz lives in Sanderstead, and his properties are in Croydon, he’s within the 3 mile radius and in-fact owns some fantastically located properties, on the borders of the new soon to be Westfields.
Did you know: 56% of landlords live within 10 miles of their investment properties.
While Mr Shiraz could sell two of his properties here and purchase perhaps 4 – 5 properties in Blackpool, his capital growth will suffer in short term and long term. As you will know by now, Croydon is a serious hotspot.
|Blackpool FY4||Croydon CR0|
|Deposit Req (25%)||£16,610||£80,000|
|No. of Beds (double)||2||2|
|Rental Price (pm)||£395||£1,300|
|Value In 5 years (estimate)||£86,000||£400,000|
|Capital Appreciation in 5 years (estimate)||£19,560||£80,000|
Looking at the above table, even with all of the factors against Croydon, I think we both know which flat we would go for, should our budget allow it.
You are seeing an estimated almost 4 times the amount of capital return as compared to Blackpool. And i’ll be really honest here, I think in 7 years from last year, property value in Croydon will increase by 100%. Let’s review this blog in 7 years I say!
Remember, if something it worth it, money will always be available. There is always someone out there looking to make money too, waiting for a joint venture.
Also, if you are asking, why did you choose Blackpool…? Well, Mr Shiraz was told it’s a good place to invest. I don’t know anything about Blackpool, but I do know how to do my research. Perhaps, if there is an area you would like me to compare Croydon too, leave a message below, and I’ll have a good stab at it!