Solihull Buy to Let sees returns of 8.76% in 2015

I was talking recently with one of my out of town landlords who was back in Solihull visiting his family.  He was brought up in Solihull and he went to Tudor Grange School back in the 1970’s and is now a University Lecturer in central London.  To enhance his retirement, he has a small portfolio of four properties in the town and wanted my advice on where to buy the next property in Solihull (as he lives in a college owned flat and anyway, would never dream of buying where he lives in Kensington (where the average value of a flat is £1.62m and a town house £4.1m.  Eye-watering to say the least!!).

Before I could advise him, I reminded him that the most important thing when considering investing in a Solihull property is finding a property with decent rental yields for income returns, yet at the same time, it must have the potential for capital growth from rising house prices over time.  Approaching the third month in the year, Solihull landlords will be under more pressure to find the best permutation of yields and capital growth, as extra stamp duty charges for buying properties and a squeeze on mortgage interest tax relief will raise their costs.

However, before we look at yield and capital growth, one important consideration that often many landlords tend to overlook, is the propensity of how likely the rent will increase.  Interestingly, the average rent of a Solihull property currently stands at approximately £929 per month, which is a rise of 0.3% compared to twelve months ago (although it must be noted this rise in rents is for new tenancies and not existing tenants).

Looking at capital growth, the average value of a Solihull property currently stands at approximately £331,000, meaning the average yield stands at 3.37% per annum, which on the face of it, many landlords would find disappointing.  That is the problem with averages, so if I were to look at a two bedroom houses in Solihull, the average value is £196,200, whilst the average rent for a two bedroom house is £729 per month, giving a yield of 4.46%.   However, if that wasn't high enough, there are some landlords in Solihull who own particular properties where they may have had to do a good deal of refurbishment, that are achieving nearly double that yield, again it comes down to your attitude to risk and reward.

Ultimately investors want to be making gains from both rent and house price growth.   When combined, the rental yield and capital growth gives you the return on investment, which is what I told our landlord from Kensington. Return on investment is everything. So, looking at Solihull, property values have risen in the last year by 4.3%, which means the current annual return on investment in Solihull for a typical two bedroom house is 8.76% a year.

Whether you are a soon to be new landlord or existing seasoned landlord in Solihull, you might be interested in a blog about the Solihull Property market, where you will find similar articles to this one about what is happening in the Solihull Property market http://solihullpropertyblog.blogspot.co.uk/.