A couple of local landlords and I had a discussion recently about the property market in Yeovil, when the subject of risk against returns arose.
All landlords are different in the way they play the property game. Some landlords prefer to accept a modest yield/return on their investment for an increased certainty of finding a quality tenant and few lengthy void periods which can cost a landlord dearly. Other landlords are interested in high returns, taking a greater risk with regards to the quality of the tenant. Before you start playing, it is a good idea to have a game plan.
For a low risk investment, you could buy property in the areas of Yeovil which are perceived as being more desirable, such as the Abbey Manor Park Estate where you may be able to achieve an annual yield of around 4-6% on your investment. Following my article a few weeks ago, if you don’t mind a slightly higher risk of void periods or a more varied quality of tenant, you are likely to be rewarded with a higher annual yield of 6-7%. This level of risk can be typically taken with Victorian terraced houses around Yeovil District Hospital and the town centre where parking is at a premium and downstairs bathrooms put off a good proportion of rental applicants. If you are after annual yields of 8% and over, you could take more of a risk with houses of multiple occupancy or properties in the poorer areas of town which may attract tenants of a low quality. In Yeovil the highest density of HMOs are close to the Hospital, mostly again in the 3 storey Edwardian and Victorian terraces, where converting a property from a single family dwelling to a house with 5 or more single or double bedrooms is relatively easy due to the layouts of the properties. Turnover is often very high and void periods can be lengthy if a room becomes available at the wrong time of year, but income is much higher, typically 2.5 times more rent than if the same property was rented as a single home, thus the return to be had can be much higher, but at a greater risk and initial expense in converting the property.
If you would like any advice on choosing properties for investment in the Yeovil and surrounding area, come and see us at our office or email us at firstname.lastname@example.org – we’d love to hear from you.