Cardiff has once again topped the list as the best yielding postcode for Buy-To-Let landlords in Wales. Cardiff hasn’t just outshone the rest of Wales though. In the last 5 years according to property lending firm lendinvest, the average Cardiff yield of 5.10% has outperformed much of England as well, with only Manchester (6.02%) and Liverpool (5.16%) beating Cardiff into 3rd place on the leaderboard.
This may come as a surprise to some who think of London as the buy-to-let landlords Valhalla. While it is true rents in London are the highest in the UK, the cost of buying a property has also risen to record levels, eroding investors’ yields to an average of 4.79%. This erosion has meant the English capital is ranked a lowly 18th in the UK for annual rental yields and goes someway to explaining the increased interest in areas such as Wales and the North of England from buy-to-let investors
Don’t feel too sad though for the London investor – While better yields can certainly be found elsewhere, better capital growth cannot. The top 15 areas of capital gains growth in the UK are all in and around London!
A simple rental yield calculation goes something like this: (“Monthly Rental Amount” x “12” DIVIDED BY “Purchase price”) x “100”. This percentage gross yield calculation is a good start however many other factors should be taken into account before a purchasing/ letting decision is made including and not limited to: Purchasing costs, ground rent, maintenance costs, service charges, insurance, mortgage payments. Many veteran investors will use the above calculation but only calculate receiving 10 months rental income rather than 12 to allow for vacant periods and any unforeseen costs. This, in truth, provides a more realistic platform to gauge an investment’s viability along with expert advice, experience and local knowledge!
Naturally, the longer an investor owns a property, the higher the likely returns. In addition to the rent continuing to flow-in there is capital growth and, for those investors on a repayment mortgage, falling amounts paid to their lender in the form of interest as the years pass.
Many landlords though take a slightly different tack and opt for an interest-only mortgage, where the capital sum is not repaid. Interest only mortgages tend to dramatically reduce monthly outgoings for investors and are often chosen by those landlords who are using the rent as an immediate income. Often for these landlords, property is their business, their employment and returns are treated as a wage. Many investors have rapidly grown their portfolios to break free of their day to day job and start their very own property empire. To speak to the experts about investing in the Cardiff property market, pop into the office for an informal chat or give us a call on 02920 259 194 for a free no obligation valuation. Cardiff is the place to be!