Are yields of 6.48% per year on the Hesters Way area the best Cheltenham has to offer the investor?

Are yields of 6.48% per year on the Hesters Way area the best Cheltenham has to offer the investor?

I regularly talk to landlords about investing in Cheltenham . Following a discussion with one of them last week, he asked me to look into the Hesters Way area, and whether it was a good place for him to invest in.  There was a 3 bed semi up for sale in mid November with Guide Price of £125,000. Average rents in these types of properties have risen by 13.4% since 2008, which is amazing considering average rents in Cheltenham are in fact only 4.5% higher (on average) than those being achieved in 2008.

Let’s say you bought  it for £125,000, the achievable rent can be in the order of £660 to £675, depending how much effort you have put into presenting it; but being sensible, we are still looking at a yield in the region of 6.4% to 6.5% per year ... yields that are only normally achieved in risky HMO’s (Houses of Multiple Occupation ie Student housing .. with the fun and games that brings!). Property values since 2000 have risen, according the Land Registry, in Cheltenham, by 92.5% but looking at the properties that sold in 2000 and again more recently, average increases in property values in the Hesters Way area have been in the region of 109.3% over the same time frame.

So is this an investors paradise – great rental growth, great yield and great capital growth?. Well, all is not as it seems. This is a great example of the headline numbers (yield and capital growth) being not 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 Hesters Way area can be up to six to eight weeks, whereas in most other parts of Cheltenham 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, because tenants in areas in such as the Hesters Way area tend to have a high propensity to move more regularly 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.

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, and for long periods of time. If you would like any advice on choosing properties, come and see us at our office on Bath Road, Cheltenham or email me on neil.west@belvoir.co.uk