Since the Credit Crunch the days of putting your money with the banks and getting a decent return on it have long gone. Over the past few years more and more people are turning to property to help achieve their investment and lifestyle goals.
So, what can you expect to achieve when investing in rental property?
In the early days, it’s all about the yield. If you’re unsure how to calculate a rental yield it’s basically the annual rent you receive from the property divided by the price you paid for it. In the Craigavon Area, the average yield is around 5% per year. (How long would you have to tie up your money in a bank to achieve that rate of interest!). Naturally, this based on averages and is dependent on location and price.
If you’re looking to invest in property for a long term, then capital growth is as important as yield.
To give you an idea, let’s look at an average 3-bedroom semi-detached property valued at £114,000.
The average asking price for properties in the Craigavon Area have risen by 18% over the last three years. Go back to 2014 and the average asking price in the area was £90,000, in 2002 it was £67,795 and back in 1987 you would have parted with just £24,665 when purchasing a property.
So, if we look at a thirty-year investment period, if you had put £24,665 into say the stock market in 1987 instead of buying a house, your shares would now be worth around £133,000. If you decided to play it safe and invested the £24,665 in a Building Society account and you reinvested the interest each year, your account balance would be sitting at around £156,000.
Now, I know what you’re thinking, that’s more than what the property is worth today! But with the rental property you would have received more than £103,000 in rent over those thirty years too, which you wouldn’t have received if you had invested in the Stock Market or with the Building Society. Making your total return on investment a rather nice £192,335.
As with all investments, there is some degree of risk involved and investing in property is just the same. It’s all about mitigating that risk to get the best return.
When it comes to investing in property do your homework, seek advice from an expert, remember it’s a business and your investment will work for you.
Orchard Lettings offers a free but to let consultation to anyone who is considering becoming a landlord which aims to provide valuable information on the local lettings market including potential rents, current demands and predicted returns. Please contact me (Gavin) on 02838 355100 or email me firstname.lastname@example.org if you would like to call in and have a chat over a coffee.