Property growth in Manchester means that there are a lot of great opportunities for property investors but these opportunities vary depending on where in the city you are. South Manchester is best for capital growth but for cash flow, the North, West and East can be a lot better.
- Property Growth and Rental Yield
- Your Investment Criteria
- Investing in South Manchester
- Your Aims and Goals
Today we are looking at a client's question about investing in Manchester property.
We'll be looking at the different areas of Manchester and asking whether the focus of an investor should be on property growth or rental yield. We'll also be looking at whether this focus should change depending on the specifics of the location.
The question is from Raj and it's...
"Dear Rob, I have watched some of your videos and thought they were thorough and very thought-provoking indeed. I am looking to invest for yield and capital gain in England. Since house prices in London have soared, I started looking at the Manchester area. My budget is just below 200,000 pounds in cash. I would appreciate some advice. Thank you. Best, Raj."
Property Growth and Rental Yield
So there are a few things to consider mainly around which areas of Manchester you should be looking at.
A budget of 200,000 pounds is quite healthy and you'll get good rental yields in Manchester for that.
So, what I'd suggest is that, instead of just thinking in terms of the headline amount, you think a little bit harder about what you want in terms of your rental yield or return.
You want to know exactly what cash flow you're looking to achieve when you invest in Manchester property.
Also, there is a trade-off here as you also want to know what potential there is for capital growth in the property as well.
Your Investment Criteria
I can give you some idea which areas of Manchester might be fit for your investment.
So, if you're looking for a rental yield of, say, 8%, you are going to have to look at quite specific areas of Manchester that are going to fit that criterion.
Likewise, if you're looking for a particular tenant profile (working tenants, social housing tenants, maybe students), again there are particular areas, or growth areas of Manchester, that will fit that criteria better than others.
Where Are The 7 Best Places To Invest In Manchester and the North West?
Thinking about investing in Manchester or close by? This is our list of the 7 best locations to invest in the north-west.
- Manchester City Centre and South Manchester
Investing in South Manchester
So as a rough rule of thumb...
South Manchester is currently performing very well for capital growth.
It has performed well for capital growth in the past, it's currently performing well and there's no reason the trend shouldn't continue.
There is plenty of investment in the area. There is employment. There are business parks. There there are good transport connections including a recently extended metro link.
So, if you want to buy houses in Manchester that have good capital growth, then investing in South Manchester is a good bet.
... but the yields can be relatively low.
- The average yield in South Manchester is only about 6 to 6½%.
- In other locations in Manchester, investing in property will get you get you 7 to 7½%.
- There are even areas of the city where you might expect 8%+
Don't be disheartened, as this article in LandlordZone points out, last year the rental yield in the city of Manchester was the best in the country.
But, when you're thinking through your investment strategy it's important to strike the balance you want between capital growth and yield.
In South Manchester, you find more property growth areas with great capital growth over the next 5-10 years.
But in those lower value areas of Manchester, your yields are going to be higher.
Investing In Manchester
So, you've worked out your individual aims and goals, now what? What's your priority?
Is it cash flow, income on a monthly basis? If this is the case you need to make yield more of a priority.
If you want to build a pension plan then maybe capital growth is where you should be looking - in which case South Manchester offers probably the best opportunity.
For more information please read our guide to goal setting.
If what you want from your Manchester property is higher yield then you should look to the North, East and West of the city.
Thanks, Raj, I hope you found that helpful...
Here are a few links to other articles we've written on how to research yield in a given area and a few other things we thought might help you along your way.