Thursday, 25 August 2016

Mount Road 3 Bed Terraces Are £28k More Expensive Than Nearby Kitchener Street But Only Deliver 0.3% Better Yields

I was chatting to a new Landlord today in her property in Mount Road. She's lived there for nearly four years and knows the area very well, so we were discussing how similar properties on the immediately surrounding streets can achieve very different sale and rental prices

This inspired me to look into whether this anecdotal evidence was supported by the actual house price data and how this translates into rental yields

I chose to look at Mount Road and Kitchener Street, focusing on 3 bedroom terraced properties that are popular with families (I also chose these two roads as to allow contrast between the Victorian terraced properties on Mount Road compared to the predominantly 'Miners Cottage' style properties on Kitchener Street)



Generally three bedroom properties are in short supply in Sunderland, from both a sales and rental point of view, so I'd assume that both roads should be popular with both buyers and tenants alike

Both roads are a 2 minute walk from the popular Barnes Infant & Junior Schools (both rated as 'Good' by Offsted) and Barnes Park and are very close to Sunderland Royal Hospital

The average sold price of a 3 bedroom terrace on Mount Road was £111,000 (based on sales within the last 2 years) and the average price paid for a three bedroom Kitchener Street property was £83,167

Interestingly both streets showed 11 transactions in the two year period

Looking at rents, the average Mount Road rent for the 2 year period was £722.50pcm, (however this was based on only 2 rental properties, one of which we manage) compared to 5 rental properties on Kitchener Street (we manage 2 of them), where the average rent was £523pcm

This works out as a 7.8% Gross Yield for Mount Road compared to 7.5% for Kitchener Street

So whilst rents are significantly higher on Mount Road, the much higher purchase price means the yields are pretty much identical

For investors looking to build a portfolio with the lowest outlay or 'money left in' it would suggest Kitchener Street properties make the best investment - however I wouldn't necessarily say this was the case!

I say this as you should always look at additional factors, not just the yield, when weighing up the best investment

Ultimately each property would need to be judged on its own merit but I would suggest that a Mount Road property would always be more popular than a Kitchener Street property, given the abundance of similar 'cottages' on nearby streets in Barnes and High Barnes (not to mention Millfield and Pallion) compared to a relative scarcity of Victorian terrace style properties such as the ones on Mount Road

Three bedroom Mount Road properties were built as that, however the 3 bedroom properties on Kitchener St would have started out life as a 2 bedroom single storey property and had a Dormer added at some point

Mount Road properties have gardens. With grass! Kitchener Street cottages will only have a rear yard

What all this means is that based on my experience it would be much easier to attract a good, long term tenant for a Mount Road property than a Kitchener Street property

Investors would need to weigh up the benefits from purchasing a more expensive Mount Road property with the need for a higher deposit (based on the above average prices and a 25% deposit you would need around £7,000 more for a deposit on a Mount Road property)

This does prove that whether you think you know the local area well or are investing from afar, you should always seek out local knowledge and expertise and consider more than just the numbers when evaluating your investment purchase

For a free, no obligation chat about any aspect of the Sunderland property market please call me on 0191 567 8577 or email neil.whitfield@belvoirlettings.com

1 comment:

  1. My current dove mountain real estate person has always responded to normal apartment issues (wonky fire alarm, plumbing, heating) with care and surprisingly good speed.

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