child mortarboard gbp briefcase bath coffeecup tree twitter search crosshair fax house papers sort house-pound brochure list-items notes printer video-camera video virtual-video bath bed camera floorplan heart-empty heart-filled heart-empty-thin heart-filled-thin sofa calculator compass share clock list map-pen map-pin pencil save business-card letter phone heard people pointer cross linkedin google-plus facebook arrow-right close triangle-down my-wink my-wink-thick house-circle loading-spinner bell close-circle dog link pinterest school transport wardrobe arrow-up one two three four five six seven tick

What to consider as a first time property investor: rental yield vs capital growth

Rental yield and capital growth are two fundamental points of consideration for a first time property investor or landlord. Winkworth discusses both of these vital factors to ensure a smooth transition into the property investment world to make sure you’re fully equipped with the knowledge to smartly invest in your first property.

If you are looking to invest your money in property, you are probably expecting either a decent yield through the income from the rent you will receive or a substantial capital gain in the value of the property when you come to sell it. Depending on where you invest, it is still possible to achieve both, although nothing of course is certain. Taking into account the length of time in which you wish to invest your money may well influence where you buy. Short-term investors should opt for an area that will deliver high rental yields, while long-term investors will want to go for a region of historical capital gains. As a first time landlord investor it is imperative that you consider what is more important to you.

Rental yield, put simply, is the annual return you can expect to make on a property you own through the rental income. To work out the rental yield you will need to know the sale price or current value of a property and the rent that you would expect to take. Your agent should be able to provide you with both. To calculate the potential rental yield on a property take the annual rent and divide it by the property value and then multiply this by 100. A property for sale at £500,000 that has an annual rent of £24,000 would have a rental yield of 4.8%.

Thinking of selling or letting your property?

Capital gain is the amount that you would make if your property were to increase in value from when you purchased it to the time you sold it. If you purchased a property for £300,000 and sold it 5 years later for £400,000 your capital gain would be £100,000. Asking your agent and researching property prices in the area you are considering investing in should give you an idea of historic capital gains in that region. You should also be aware of the tax implications of owning a rental investment as a second property when considering and calculating your finances. Investment properties that are purchased by those who already own a property are subject to an additional 3% SDLT surcharge, so that’s 8% stamp duty tax if over £250,001, as opposed to the 5% you would pay if you were purchasing your first property.

Across the UK rental yields are generally strongest in commuter belt areas, with capital gains being most likely in towns and cities that are historically highly desirable such as Bath. Chris Baker, Franchisee of both Winkworth Bath and Winkworth Exeter comments; ‘ Investor landlords tend to look at rental yields and Bath property is historically all about capital growth and longer term gain, although we have seen rental yields increase here over the last year. Exeter however is a very different market. Rental yields here are higher than in Bath, at around 6-8%, but the growth of the capital is a little slower, so we do see more investor landlords.’

Over the last 10 years all boroughs in London have seen property price increases so capital gains for investors taking a longer-term view have been strong. However, rental prices have not risen in line with price increases and rental yields have not been so strong; some areas have even seen a decline. Stratford, Crystal Palace, Pinner, Bromley and Wapping all achieved rental yields of over 4.9% in 2017 which - for London - is a good return.

Hoey Court, London, E3

This property located at Hoey Court in London is a great example of an ideal rental investment

This property located at Hoey Court in London is a great example of an ideal rental investment. Located within a fairly new development close to Devons Road Transport Links, it provides swift access to the City and Canary Wharf. This quick access can demand a generous level of interest and higher than average rent for a one bedroom apartment.

For more information contact Winkworth Bow or call 020 8981 6776.

Marston Gate, Hyde, SO23

Walking distance from Winchester’s city centre, this property can provide a strong beginning for any first timer’s investment

Situated just walking distance from Winchester’s city centre, this property can provide a strong beginning for any first timer’s investment who is looking to make profit on rent. With a location just moments away from Winchester’s train station, it guarantees simple access into London, and even closer access to the southern sea ports of England.

For more information contact Winkworth Winchester or call 01962 866777.

Prior Park Road, Bath, BA2

Located in the lovely and iconic city of Bath, this very spacious property is perfect for any first time property investor
Located in the lovely and iconic city of Bath, this very spacious property is perfect for any first time property investor

Located in the lovely and iconic city of Bath, this very spacious property is perfect for any first time property investor who is looking to make capital gain on a long term investment. Just a short walk from the Bath’s city centre, this property provides the perfect location and home for families looking to settle down in the perfect neighbourhood.

For more information contact Winkworth Bath or call 01225 829000.

If you are considering a rental investment get in touch with your local Winkworth office who will be very happy to help you with the process.

Visit here for more information on how to find your local office.

Are you looking to buy, sell, rent or let?

Related posts

All I want for Christmas

With Christmas only around the corner, we’ve asked a selection of agents across the Winkworth network to choose a house that they would, if only they could, buy themselves for Christmas.

Read post

December 05, 2018

Entertaining this Christmas?

Read post

December 03, 2018

What has affected the UK property market over the last ten years?

Over the last 10 years we have seen a number of factors influence the UK property market, we take a look at the effect this has had on the current climate

Read post

November 30, 2018

Find your Local Office

Find your Local Office

Speak to people who, quite simply, love their patch and love what they do.

Get a Free Valuation

Get a Free Valuation

Thinking of selling or letting your property, or just interested to know what it is worth nowadays?