Are yields of 9.6% per year on The Cray the best Rochdale has to offer an investor?

Are yields of 9.6% per year on The Cray the best Rochdale has to offer an investor?

I regularly talk with landlords about investing in Rochdale and last week was no exception. Having received a call from a London based investor he asked me to look into The Cray Estate in Milnrow and whether this was a good place for him to invest.  During our conversation he mentioned there had been a 3 bed townhouse up for sale during July with a Guide Price of £60,000. Whilst he lost out on buying the property to another purchaser, he wanted to ask if a subsequent property came up in the area whether or not it would make a good buy to let investment. Average rents in these types of properties have risen by 32.8% since 2008, which is amazing considering average rents as a whole in Rochdale are only in fact 4% higher  (on average) than those being achieved in 2008.

Let’s say when a similar property comes on the market in this area you buy it for £58,100, the achievable rent could be in the order of £450 to £465, depending how much effort you have put into presenting it; but being sensible, we are still looking at a gross yield in the region of 9.3% to 9.6% per year ... yields that are only normally achieved in HMO’s (Houses of Multiple Occupation) which I have tended to avoid for a number of reasons.

Property values since 2002 have risen, according the Land Registry, in Rochdale, on average by 47.3% but looking at the properties that sold in 2002 and again more recently, average increases in property values in the Cray Estate area have been in the region of 23.6% over the same time frame.

So is this an investor’s paradise – great rental growth, great yield and reasonable capital growth? Well, all is not as it seems. This is a great example of the headline numbers (yield and capital growth) not being the only factor to consider when choosing an investment property, as you should also consider how long it takes to find a tenant. The average time it takes to find a tenant in The Cray Estate area can be up to six to eight weeks, whereas in other parts of Rochdale a tenant is usually found in one or two weeks. If you take into account the extra five or six weeks of void period for your property, every six to nine months and the extra fees a landlord has to pay each time a tenant moves in and out, the annual overall return from the property is lower than it seems. I am not suggesting you don’t buy it, but please go in with your eyes wide open and having done your homework.

We can help you to find the best investment property with our specialist lettings advice. It is in our interest that you buy a property which will rent well, for long periods of time, with the maximum return and the minimum amount of potential risk. If you would like any advice on choosing properties, please come and see me at our newly refurbished offices on Cheetham Street in the centre of Town.