Today we are talking about rental returns. Specifically gross rental yields. When a landlord buys a property to rent out there are two main things most take into consideration. The first is the gross rental yield. The 2nd is the potential for capital growth.
If you take a look at the graph above, you can see how the gross rental yields alter across the country. Prime central London gives the lowest yield whilst Sunderland gives one of the highest. If this graph showed house price growth over the past 10 years, I’m sure many would argue that prime London has still been the better investment!
Generally speaking private investors try to aim for gross rental yields of between 5% and 8%, in order to ensure they cover their costs and make a profit.
In Lancaster, there are still some great investments to be had. Take a nice 2-bed terrace in Skerton. If it cost you £110,000 to purchase, yet you let it for £550 pcm- this would give a gross return of 6%. We have a 2-bed apartment for sale at Buoymasters. Buy this at £155,000. Let it at £700pcm and you would get a gross return of 5.4%.
Over in Morecambe and the rental yield is even more appealing. Plus the promise of the Eden Project North coming to the area is attracting investors who are also hopeful of good future capital growth. 7% gross yields can be often achieved and there are now many investors looking at air BnB options in the area.
In a nutshell – Yields are critical to measuring income returns and gross yields are a good starting point for quickly comparing locations and properties.
If you are considering investing in Lancaster or Morecambe, please get in touch. Even if you have seen a house with a different agent, we can let you know our thoughts on your potential rent and the type of tenant you would attract.
My name is Josh Heron. You can call me on 01524 843322 or email me at josh@jdg.co.uk
Thanks for reading
Josh