Buy to let - is Meopham a good place to buy?

It’s important to have a balanced portfolio when buying and renting out property. Getting the balance between buying properties that offer good monthly returns (high yields) but quite often offer poor capital growth (i.e. they don't increase in value that much over the years compared with the average) verses properties that do go up in value quicker but often offer a lower yield is tricky. Another consideration has to be the mix of town properties verses the villages.

Choosing the right village, though, is very important. Living in a village often has a higher cost, especially transport and petrol. Some tenants don't buy because they can't afford the mortgage, so if you buy in the wrong village, you could limit yourself to the type of tenant who can afford those extra costs.

However, one town that has a high demand with tenants is Meopham, particularly popular with workers from London and the surrounding areas who know of the village’s popularity. With five churches, three pubs, three schools, possibly the most idyllic cricket green and a windmill, Meopham offers a peaceful environment matched to a varied social scene. The village consists of some 4,000 dwellings of different housing types and a population of just over 6,400 people.

Rental prices range at the lower end from around £600.00 per month for a one bedroom ground floor flat, which at that price should fly out the door. £750.00 should get you a purpose built two bedroom apartment, while a three bedroom semi-detached can be rented for between £1100-1250.00 per month, depending on condition. If you really want to splurge, there is a very nice five bedroom detached property in the vicinity going for £1900.00. There is always a huge demand for properties in Meopham – currently there are only seven available, compared to 50 in nearby Northfleet.

So, does that mean you should buy a property in Meopham as a buy to let investment? Before I can answer that, you must really consider the capital growth vs yield question. Some local buy to let investors often make the mistake of chasing yield over capital growth. Some investors believe that by chasing high yielding properties, in say the more deprived parts of Gravesend, they will make a faster profit than waiting for capital growth. The problem with this is that to achieve high yield you usually have to compromise on capital growth.

Therefore it would seem the most logical solution is to find a high yielding property in a strong capital growth area but, these simply don't exist, and in actual fact, most of the time lower yielding properties have a better capital growth. This is because there is generally a contrary relationship between yield and capital growth so the higher the yield, the lower the capital growth and vice versa. Property investment in Meopham, and Gravesend as a whole, is about balancing the two.

Not many landlords, especially those of you who use buy to let mortgages, can afford to service high levels of debt without a reasonable yield, forcing you to look at ways of making an investment affordable by finding the right balance between capital gain and yield. 

Yield is critical to the survival of a buy to investment but it’s not the key to building wealth. Don’t chase yield for yield’s sake, but rather chase capital growth with enough yield to make it serviceable, because in the long term, it is the capital growth, not the yield that will generate you the wealth and the financial independence you are seeking.

For advice (it’s free!) on how your property is performing, call us on 01474 833050 or 01322 860500, email us here, visit our website here or pop in to see us in either Southfleet or Sutton At Hone.

P.S. Our next blog post will be 16th May.