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Why Wales tops the charts for rental returns

Some fascinating stats came out a week or two ago, which sent a clear message to every buy-to-let investor: for the best rental returns, come to Wales.

Not just Wales, it has to be said. We topped the chart in some excellent company:  the North West, North East and Midlands. All regions that could hardly be said to be “glamorous”, but at 6.4% gross yield, according to BM Solutions, the biggest landlord lender, we were all way ahead of hot spots like London and the South East.

The reason is quite simple: property prices are relatively low here while demand for rented accommodation remains buoyant. Landlords can afford to invest in two, three or even four properties for the price of one central London one – spreading their risk and, while still charging affordable rents – enjoy a sound return.

Of course, investing in buy-to-let is not just about rental yields. One eye will always be trained on capital growth – the big uncertainty that can upset every investor’s apple cart! In and around London, where yields have been lower, house values have risen significantly. But if we have learned nothing else from the past 10 years, it is that property prices go down as well as up!

That makes it critical for investors to take the long view: we know property prices have continued to stay well ahead of other indices in the past 20 or 30 years, but it has been a bit of a roller coaster at times. That makes rental yields – crudely, the cost of the investment divided by the income – an even more important indicator, because they should be steadily giving you a sound return year after year… regardless of house price movements.

But even there, Wales has performed pretty well. At the beginning of this year, the Royal Institution of Chartered Surveyors (RICS) predicted that house prices would rise by 7% in Wales during 2014. The market – after a very frothy start to the year, stimulated by Help to Buy – has steadied down now, mainly on concerns about interest rate rises. However, anyone with a residential property in their investment portfolio should see solid capital growth in 2014 as well as excellent rental yields.

At a time when safe havens like banks and gilts are offering pretty paltry returns, this represents a very handsome bonus.

For anyone considering making the move into property, conditions remain favourable. Demand for rented remains high and you can still get in on the ground floor for well under £100,000. With buy-to-let mortage rates very competitive (certainly well below rental yields), a £20,000 – £25,000 start-up pot can put you on the road to being a landlord.

And no, it doesn’t mean having to fret about finding tenants or handling repairs and maintenance – specialist businesses like ours will cover all that for you… we can even help you find a property to invest in, and help you negotiate the keenest possible price.

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