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News: BTL yields the number one driver

Tue, 11 Sep 07

Yields should be the key concern of anybody looking to get into residential buy-to-let investment in the UK, according to one industry operator...

Speaking to the Mail on Sunday this weekend, Peter Grant of Grant Management said his first question when considering the purchase of a property would be to ask himself what sort of yields he could reasonably expect to see.

Yield "is the number one driver" he explained, adding that he would have to expect "a minimum of six per cent" before committing to the purchase of a property. For this reason, he advises potential investors to steer clear of the beaten track.

He told the paper that areas such as London have been saturated by investors and as such have seen yields decrease, something which has not been helped by the exponentially rising prices in the English capital.

Capital values ‘still rising’

To Mr Grant, the ideal property is one that is central and well located, yet dilapidated. This means that it can hopefully be acquired for less money and then refurbished to be let out, or even sold on at a profit.

"Capital values are still rising" he claims, before explaining that, although "prices are holding, if they fall, that's a good opportunity for landlords to buy".

His comments echo the recent findings of a study by property investment analysts Mortgage Trust. The study found that, compared with other investment vehicles for performance over the past year, property scored the highest marks.

The average property made total returns - that is capital gains combined with rental income - of around 11.6 per cent for the 12-month period ending July 31st 2007. In comparison, the FTSE 100 - the next best performing investment vehicle - made gains of just over seven per cent.

Diversity is the key

John Heron, the trust's managing director, commented: "The key to any investor's portfolio is diversity. Landlords continue to adhere to this rule, with a wide range of investments in the average portfolio.

He added that in his view, the "high proportion of property" that many investors hold "is testament to how low risk they perceive buy-to-let investments to be".

"Yields are consistently around six per cent and, with gearing, the effective yield is much higher. Add into that the capital gains on a property and buy-to-let is an attractive long-term option," he explained.

Source: http://www.assetz.co.uk (Press release)

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