I recently got chatting to a local landlord about his two buy to let properties in Melton Mowbray, one of which is a three bed town houses in Dieppe Way (also known as the Fairmead Estate) and the other is in Kirby Fields (a nice Jelson three bed semis just off the roundabout at the bottom of Edendale Road). We spoke about the two properties in both areas and he wanted some advice on where to buy the next one. I did a comparison between the two and was surprised to find that the property market in the Dieppe Way area had outperformed the Kirby Fields development market by 43%!
The average price of three bed town house on the Dieppe Way Estate is £89,400. When you consider the rents that are achieved in the Dieppe Way Estate are an average of £500 pm, this gives us a yield of 6.71% per year. So is the Dieppe Way Estate the best investment? Well, in the Kirby Fields area, where the the average value of a three bed semi detached property is £163,100 and the average rent for such a property is £638 pm, giving a much lower yield of 4.69% per year. This makes the yield/ return in the Dieppe Way estate 43% proportionality more than property in the Kirby Fields area, so surely it is the best investment, isn’t it?
However, this is a great example of annual yield/return not being the only factor when choosing an investment property, as you should also consider how much the value of the property goes up in the long term. In the last 16 years, property values have risen on average by 133.4% on Dieppe Way (rising from £38,300 to the £89,400 mentioned above), which is very impressive considering there was the 2008 property crash. However, average property values for property in the Kirby Fields area have risen on average by 180.7% in the same time frame. You should also consider how the area in which a property is located can affect the potential void periods which can really hamper the performance of a property investment.
So, if you are investing in the Melton Mowbray property market, do you want capital value or yield? If you would like some advice about buying to let, be you a landlord with a portfolio or someone thinking of investing in the rental market, please come and see me at our office on Burton Street, Melton Mowbray or visit my property blog – meltonmowbrayproperty.com.