I was talking to a couple last week, who are considering becoming landlords for the first time and they were looking for advice as to whether a property on West Croydon (Kidderminster Road) or a very different area in Sanderstead (West Hill) would make better Buy To Let investments. They were interested in which would offer a better return / yield, and whilst properties on both streets can let and sell well, I wanted to do a bit more research to help them with their decision.
Now you may be wondering why I am comparing two completely contrasting areas. Bear with me, I will explain all!
The average value of a property on Kidderminster Road is £274,791, while on the luxurious West Hill is it a whopping £941,685! That’s an increase of 242.68% and within 15 minutes of each other.
To better understand the investment opportunities available, we considered the average rents on those streets. Now remember that I am talking about the average rents of the streets as a whole, rather than individual types of houses. The average rent achieved on West Hill is £3000pm while on Kidderminster Road is £1400pm. Now when you convert these into Yields, West Hill shows up with a 3.82% yield while Kidderminster Road brings home a super impressive 6.11%. That’s a 59.9% difference, which will make most investors think twice before investing on West Hill.
But let’s slow down a little here. I said this in my last ‘Headline’ post, will most probably say it in all my future ones –
“Investment is not just about high rental yield. It is about finding the balance between yield, capital appreciation and property type “
Now, ofcourse that is just my humble opinion. I have been in the industry a long, long, long time now, and have seen through hundreds of deals to know what goes on, who wins, who loses etc, so I believe I am entitled to some strong, un-biased opinions on the subject.
So, saying that, I advised the couple that they must consider what they are looking for. It turns out that their strategy was to sell the property in the next 10 years. Now their budget was around the £350,000 mark so investing on West Hill was a possibility (there was recently a new development of 1, 2 and 3 bedroom flats on the corner), and exclusively with our Agency there will be another 9 in the very near future.
So we went back to the drawing board (or computer) and dug up some information about the two road’s history on capital growth.
The average price on West Hill at the end of 2003 going into 2004 was £505,540 and on Kidderminster Road was £176,600. Compare that to today’s values (as I stated at the start), it is clear to see that West Hill has increased in value by 86.31% (or £426,245) and Kidderminster Road has increased by 57.56% (or £274,791). Between the two, that’s a 49.95% increase from West Hill’s side.
So as you can see, and as I explained, investing is not always about the huge yields. It’s about finding that balance between Capital Appreciation, Yield and Property Type. After all, all of this is irrelevant if the property type is of an un-let-able nature. You can’t rent a shed.
If you would like more information on investing in the Croydon area, please call me 07957336999, visit my website: www.CroydonPropertyNews.co.uk or / and visit our office for a tea and a friendly chat!