Locating the highest yielding locations for buy to let

by Readers Question

18:21 PM, 20th August 2013
About 7 years ago

Locating the highest yielding locations for buy to let

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Locating the highest yielding locations for buy to let

As a relative newcomer to buy to let investment, but a seasoned hand at web development, I decided to build a website that would help me find the highest yielding areas of the UK. The result of this is http://www.dontbettolet.comLocating the highest yielding locations for buy to let

By leveraging Zoopla’s property data, the site compares the average rent versus asking prices in a given area. Obviously where no properties are available to rent or buy, there is no data.

You can search by postcode, view the Top10 areas, and also view a breakdown of London yields.

I will be adding further filters in the coming months.

Hope it’s of use, and any feedback gladly received.

Thanks

Will Ogden



Comments

Mark Alexander

18:23 PM, 20th August 2013
About 7 years ago

Hi Will

In principle I like the theoretical concept, however, can an algorithm provide the level of accuracy and detail landlords would want?

I will leave that to the Property118 community to decide and add my comments later.
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Vanessa Warwick

18:51 PM, 20th August 2013
About 7 years ago

Hi Will,

I absolutely LOVE the concept.

I had a play on the site and put in my own post code. It brought up some properties, but I could not click on the highest yielding one to go to the property listing?

How does your algorithm distinguish between a one bed flat and a three bed house? Or doesn't it?

What yield calculation do you use?

I would like to know more and there may be some synergy with your product with Property Tribes and another product we will be launching shortly. Will you be providing a widget that can be embedded in other people's sites?

How do you intend to monetise it?

Sorry for all the questions, but I am excited for you, and it would be worth us having a chat. 🙂

In the first instance, please also let the Property Tribes community know about your site and ask for their feedback too....

Neil Patterson

9:43 AM, 21st August 2013
About 7 years ago

Hi Will,

I like the idea:)

With regards to Vanessa's question about type of property I am assuming that as the only results shown are Yield which is a calculation based on the percentage of rental income to Value that this is irrelevant to the equation for now or are you planning to break down property types later.

I have done some test though and you still have some work to do on the results. I suspect where there is not a large amount of information available that this mathematically skews the results to show a very low yield some how. I suspect you have an error where it is taking too many property values and not enough rental incomes. This should be a ratio of 1 to 1.

Results for areas I know to have a reasonable yield have ranged from 1.07% to 2.46%.

I hope that helps.

Mark Alexander

9:54 AM, 21st August 2013
About 7 years ago

Hi Will

I agree with the comments left so far.

I have a few properties which are all yielding circa 6% around the postcode area of NR6 7HS. The system is showing average yields of 1.36 to 2.49%.

I'm good at what I do, and my properties are good too, however, I can't believe that my average yield is 3 or 4 times greater than the average for the area.
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Will Ogden

9:58 AM, 21st August 2013
About 7 years ago

Reply to the comment left by "Vanessa Warwick" at "20/08/2013 - 18:51":

Hi Vanessa,

Glad you like the concept. To answer your questions:

1. You're not able to link the available properties yet, it's on the to-do list!

2. The system compares properties of the same number of bedrooms when calculating yield. Properties with more than 5 bedrooms are all lumped together.

3. The yield calculation is (avg rent per week * 52 * 100) / avg asking price

4. Synergies sound interesting! Drop me an email at "support at dontbettolet dot com"

5. Options to monetise are advertising and possibly subscription. Depending on how accurate I can get the data some premium metrics might be work.

Will cross post onto Property Tribes. Thanks again for feedback.

Will

Will Ogden

10:05 AM, 21st August 2013
About 7 years ago

Reply to the comment left by "Mark Alexander" at "21/08/2013 - 09:54":

Thanks Mark.

The current issue is the level of data cleansing needed when pulling data from Zoopla. For instance if you look at Oxford there is an area that apparently yields 15%! When I looked into this it's due a Canal boat for sale for £50K...it has one bedroom therefore is compared with the average rental of 1 bedroom properties (£750ish from memory). As I find this edge cases I am implementing filters to remove them. Same goes for retirement flats that haven't been classified correctly.

Another issue is sample size for an area. If there are not many properties available then results can be scewed...I actually calculate the yield for groups of postcodes in an attempt to increase the same size...postcode is just to granular. The London yields are probably the most representative due to the density of properties.

Thanks

Will

Jonathan Clarke

10:07 AM, 21st August 2013
About 7 years ago

I like the concept yes but the level of detail required for anyone to make a serious investment decision will never be achieved I fear. The data required to service that need is simply too overwhelming. At best an overview. But at worst distorting and misleading. There are many different ways to calculate yield and these all need to be highlighted before one even starts to contemplate mapping it out in any meaningful form.

It reminds me of Zoopla`s `current values` page. I have 2 virtually identical flats in the same block and it valued them 20K apart . Considering they are both circa 70K the price suggestion and differential is indefensible. Nothing beats first hand local on the ground knowledge in my view and some investors maybe tempted to make important decisions based on perhaps unintentional but nevertheless misleading data

Mark Alexander

10:17 AM, 21st August 2013
About 7 years ago

There is a very useful podcast about calculating yield on our Landlords calculator page - see >>> http://www.property118.com/landlords-calculator-v2/40091/40091/

You can listen to the podcast without downloading it and without any additional kit, other than speakers connected to you PC/or Mac of course!

Please check out our landlords calculator whilst you are there too 🙂
.

Neil Patterson

11:00 AM, 21st August 2013
About 7 years ago

Reply to the comment left by "Will Ogden" at "21/08/2013 - 10:05":

Hi Will,

From this comment about the canal boat and the calculation described as:

The yield calculation is (avg rent per week * 52 * 100) / avg asking price

Have I got my assumption correct that you are calculating yield using the average rent for a property of a particular size in an area compared to the average asking price for a property of that size in the area.

If this is the case then you will get a fairly wild swings from the Standard deviation Curve.

To be accurate for all areas the Maths need to be:

Annual rental income for that exact property expressed as a percentage of the actual asking price/value for that property. Then averaged out using all the individual calculations.

Unfortunately you will not get this data as you will not have the two figures together.

Therefore for low data areas the Standard deviation will always be extremely high.
e.g. You can have an average of 100 properties for sale, but only an average of 1 property for rent which is not statistically very relevant.

Are my assumptions correct or have I misunderstood?

Mary Latham

11:03 AM, 21st August 2013
About 7 years ago

i am not a teckie person but I do know my areas and the figures that I have just pulled up are a mile out. According to this my properties have zero yield in some areas and given that the sales prices have not been high recently and the rents very good I can't understand how this can be?

There are also additional overheads that I assume have not been taken into account in some areas and that these figures are only gross yield?

Take Oxford which is coming in at 15.46% the second highest. A very high proportion of the rented properties in Oxford are HMOs - let to students - property prices are very high, as are rents but there are the additional overheads of HMO licence fees for all of these properties and the cost of keeping them up to the required standards, on-going costs of high wear and tear and increasing demands for more extras. All of these things would need to added to the calculation and I assume that this would have to be done manually? There are also letting and management fees to consider and that can vary greatly even in the same areas. I have let in Oxford since 1972 and I have seen a huge increase in the on-going costs. The rental market is very buoyant but property prices have always reflected this.

It also has to be considered what you are going to do with the property. Will it be let as a family home or an HMO? The calculation for a single or family let are quite simple but those for an HMO are very complicated. Is it a traditional HMO - where the landlord must clean and maintain the common parts throughout the tenancy or is it a HA 2004 HMO that was once a shared house? Have some rooms been converted into bedrooms to bring in additional rent? Is it let to people on LHA at standard rates or will there be a top-up? The overheads during void periods also vary greatly especially since some local authorities are now charging Council Tax to landlords from day one and others are allowing 1-3 months exemption.

Even within the same post codes there can big variations in rents. Take the area around the University of Birmingham. A property that is at the bottom of the road and close to the uni gates will command a much higher rent than the same property at the top of the same road which is just 3 minutes extra walk and in the same post code.

Even in single lets there are variations. In some areas rents are affected by parking restrictions and having the front garden used as a car park will increase the rental income and reduce the voids. In other areas there is resident only parking and this too can vary in the same roads.

I would really love to see a way of accurately calculating the net yield on a property but perhaps that would need a system where all the questions are asked and the variables used in the calculation, otherwise this could be very misleading to inexperienced investors.

Follow me on Twitter@landlordtweets

My book, where I warn about the storm clouds that are gathering for landlords is here >>> http://www.amazon.co.uk/dp/1484855337

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