I get calls from investors on a daily basis, both local landlords renting out property in Sunderland and those from further afield looking to invest in the area.
More often than not, local investors seem more inclined to look only to the areas they know and seem reluctant to break out of their comfort zone (which is typically the SR2, SR3 and SR4 postcodes).
This means they are missing out on great investments, which ironically are often snapped up by investors from out of the area who aren’t constrained by preconceived ideas and have a much more open mind.
This is never more apparent than when I mention areas in the SR5 postcode area in the north of Sunderland.
It’s true that parts of SR5 (particularly Castletown and Southwick) have had their social problems in the past and have a reputation for attracting only benefit claimant tenants but we would rarely promote properties in these areas (and if we did would only highlight properties which we could 100% guarantee would attract a working tenant).
I often highlight 2 or 3 bedroom properties in SR5 postcode in areas such as Downhill, Town End Farm and Redhouse (which are not “problem areas”) which would attract working tenants & families who often look to stay in a property long term due to having a close family support network nearby.
It’s possible to pick up properties in the above areas for a better price than in comparable properties south of the river, making them worthwhile investments and making it possible for landlords to expand their portfolios for less.
As an example, the average price of a 2 bedroom semi in Redhouse was £69,939 last year which would return a Gross Yield of 7.7% based on an achievable rent of £450pcm. The average price for a comparable property in Farringdon (SR3) or Grindon (SR4) was £75,608 & £87,696 respectively. Whilst the purchase price may be higher, the achievable rent may be a little higher in Grindon or Farringdon (£475 - £495pcm), returning healthy 6.5% - 7.8% Gross Yields.
Whilst the above areas would be chosen for their ability to deliver healthy yields they would not be the areas where an investor should automatically expect to make significant capital growth. That said, it’s worth noting that in all three areas prices are currently 15% - 20% down on 2007/2008 peak levels, suggesting that when the market does improve, there is room for some capital growth.
Regular readers will know we rarely promote flats in or around the City Centre or Ashbrooke but do suggest that the 1960’s & 70’s built two bedroom flats in Moorside (SR3) can make good investments. The average sale price of a Moorside flat is £78,505 and with rents ranging from £450 - £495pcm Gross Yields of 6.8% - 7.6% can be made. A comparable 2 bedroom flat in Downhill costs on average £59,850 and will return 7.9% Gross Yield based on a conservative achievable rent of £395pcm.
So clearly the above areas are worth considering based on the returns.
What’s more, given competition for tenants is often more fierce in the more established rental areas of SR2, SR3 & SR4 due to a greater supply of properties, landlords who are prepared to look further afield can find that they find it easier to pick up good tenants and therefore have less of a risk of their properties remaining empty.