1st January 2020
There’s no denying that the lettings market has had it tough over the past 12 months. We’ve seen massive changes in legislation, not least the Tenant Fee Ban, which has mad things harder, both in terms of workload and income. As landlords, it’s difficult to know which path to take – how can we continue to grow and even thrive in this new landscape? And where should we be looking if we want to expand our portfolio to get the best return for our money? Here, we will talk you through some of the recent figures showing the good, the bad, and the downright ugly when it comes to the highest yields in the buy to let market.
The Great Postcode Lottery
As with everything these days, location is king, and that’s particularly true if you’re searching for buy to let properties. It might come as no real surprise to learn that areas boasting the highest yields tend to be in university catchment areas, so if you happen to be looking within NG1, for example, you’re quids in with a massive 11.99% yield – the highest in the UK.
But that’s only part of the equation – if you’re thinking longer term, you’ll also be considering things like capital gains, and rental price growth. With this in mind, information gathered by the UK Land Registry and Zoopla recently looked at the best and worst areas to purchase buy to let properties in the UK – and the results are quite surprising.
The overall ratings
Taking into account the overall yield, plus capital gains and growth, the research revealed that the most lucrative place for buy to lets is Colchester – perhaps influenced by the University of Essex winning the ‘University of the Year’ award in 2018. In fact, the majority of placed that ranked in the top 10 were University cities, which is not surprising as they tend to be the most sought after by the annual influx of students looking for accommodation near to where they study.
The rest of the best were as follows:
The rising stars – The Midlands
There are three notable Midlands based cities in the top 10 – Birmingham at 4, Coventry at 6, and Wolverhampton at 7. Interestingly, Wolverhampton seems to be the one to watch – an area which has risen from 20th position on the last recorded survey. Recent regeneration in the Midlands as a whole has ensured that properties in these areas will remain to be sought after, and are expected to see future growth with the forthcoming HS2 rail line, making it more accessible and attracting new business to the area.
In contrast, areas around London have begun to see a decline, as again the landscape has changed, and we see more people being ‘outpriced’ by the property market.
The lowest yields
The bottom five in terms of yield are TW20 Twickenham with 2.00%, WD7 Watford with 1.99%, N6 London at 1.93%, HP9 Hemel Hempstead with 1.91%, and bottom of the league CW12 Crewe, with a mere 1.88%. Landlords who have properties to rent in these areas may find that they have to work a whole lot harder to increase those yields.
Other ways to increase the yield of a rental property
When you’re looking at ways to increase the yield of a property, there are a few basic things you can do which could help you get those numbers up – and they’re often overlooked.
Check your spending – It might seem pretty obvious, but if you’re spending out for things like insurances and mortgages, that’s all money taken from your profits, so it’s important to review what you’re spending on a property, and shopping around for better deals if you want to maximise your income.
Research tenant needs – In order to make your property as attractive as possible to tenants, you need to think carefully about what they might be looking for. Nowadays, people demand adequate storage, a good number of electric points, and plenty of space to fit kitchen appliances – if you can provide what they need, and offer additional sweeteners, then they will choose your property over one which doesn’t have those things – and they will pay a premium for it.
Kerb appeal – and the ‘wow’ factor – People shop with their eyes, so think about what your potential tenants see when they approach your property. Make sure that the garden is tidy, fences and gates are in good repair, and doors and windows are clean. First impressions of your property are vital in getting a ‘yes’ to what you are offering. And that means creating an attractive exterior, as well as a well decorated and maintained interior.