Investing in property is essentially different from investing in stocks and shares or putting money in the Building Society. Whilst these other investments (Building Society Passbooks, Stocks and Shares etc) are passive i.e. once the money has been invested it you leave it alone, with BTL, things are more hands on, in fact it’s almost a business!
One thing the landlords I speak to say is the fact that they like BTL because it is both an investment as well as a business. It is this factor that attracts many of my Walsall landlords – they are making their own decisions rather than entrusting them to others – such as City Whizz Kids in London playing roulette with their pension pots.
So if you are investing in the Walsall & Surrounding Area property market, you can earn from your investment in two ways. When a property increases in value over time, it is known as ‘capital growth’. Capital growth, also known as capital appreciation, this has been strong in recent times in Walsall, but the value of property does go up as well as down just like shares do but the initial purchase price rarely decreases. Rental income is what the tenant pays you – hopefully this will grow over time. If you divide the annual rent into the value, or purchase price, of the property, this is your yield, or annual return.
I was talking to a landlord who bought a terraced house in the WS1 area of Walsall. He bought a very pleasant 4 bed terraced house in 1999 for £27,000. It sold again in August 2015 for £115,000, a rise of 325.92% in just over 16 years – a compound annual return of 10.14%.
However, the real returns are for those Walsall landlords who borrowed money to purchase their BTL property. They have made significantly higher returns than those who paid 100%cash. If the landlord had borrowed 75% of the £27,000 purchase price of the WS1 terraced house on an interest only 75% mortgage, he would have only needed to invest his deposit of £6,750 and then borrowing the remaining £20,250. His £6,750 would be worth £94,750 today; £115,000 less £20,250 interest only mortgage) ..a rise of 1303.7%! – a compound annual return of 19.26%. ..and I haven’t even mentioned the rent he would have received in those 16 years!
This demonstrates how the Walsall BTL market has not only provided very strong returns for average investors since 1999 but how it has permitted a group of motivated BTL Walsall landlords to become particularly wealthy. In fact, if this landlord had continued to remortgage the property as it went up in value, he could by our reckoning have had additional two or three properties, albeit with larger mortgages but greater future potential.
As my article mentioned a few weeks ago, more and more Walsall people may be giving up on owning their own home and are instead accepting long-term renting whilst BTL lending continues to grow from strength to strength. If you want to know what would and would not, make a decent property to buy in Walsall for BTL, then one place for such information would be the Walsall Property Blog!
Phone: 0345 257 9850/ 01922 637672