Landlords told to consider capital gains
Posted: 04 May 2006 09:46:11 GMT
As buy-to-let investment becomes increasingly popular in the UK, landlords have been reminded that capital appreciation can in many cases be more important than rental income.
Steven Currie, head of property management at Edinburgh-based DJ Alexander, has recalled an occasion when he was asked to give advice on whether or not a particular property was a good residential letting investment.
Writing for the Scotsman, Mr Currie states that the property was worth around £160,000 and that another £20,000 was needed on refurbishments.
Rental income, he suggested, would have been in the region of £7,800 a year, producing a gross annual return of less than five per cent.
With other costs taken into account, Mr Currie even speculated that the net rental return could be below three per cent per year, which on the face of it sounds like a less than intelligent investment.
Because the property was located in Edinburgh's New Town, however, he advised that it was a good investment opportunity, with capital appreciation ultimately a more significant consideration than rental income in terms of end value.
At the same time, many areas in the UK are currently performing exceptionally well in terms of rental income, with landlords finding they can maximise tenant interest by advertising online.