FIND THE BEST RENTAL YIELD IN THE UK – IS BEING A LANDLORD WORTH IT?
Alexandra Ventress
May 15th, 2023
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Becoming a landlord is often regarded as one of the best investment decisions you can make in terms of security and longevity. However, it is not a decision to be taken lightly. Becoming a landlord means understanding the responsibilities you will need to undertake, as well as understanding the finer points behind it, such as rental yields.
But what do you find the highest UK rental yield? And how does the average property price affect tenant demand?
In this blog post, we will be looking at where in the UK you can find the highest rental yield, as well as looking at the pros and cons of becoming and landlord, and how we can make investment work for you.
When it comes to being a property investor, there are two main ways that you make a profit on your buy-to-let investment. This is through capital growth and rental income.
Capital growth is usually a long-term consideration, as many investors purchase with the intent to hold onto the property for many years. It is beneficial to buy-to-let investors as when the time comes to sell the property, they will have to deal with the high costs involved with selling.
Rental yield is the annual amount you can reasonably expect expressed as a proportion of the property market value. An example of rental yield would be a property that was on the market for £200,000. If on average tenants in the area would rent a property similar to this for £900, then the total annual rental income would be £10,800. This property would then provide a rental yield of 5.4% as £10,800 divided by £200,000 is 0.054.
There is no set price for how much a good rental yield in the UK is, as exactly how much your return will be depends on your expenditure, as well as the location of your property. As a rule of thumb, a good average rental yield is anywhere between 6% and 8% according to Natwest.
However, when it comes to choosing your first or next buy-to-let investment, you shouldn’t choose based solely on predicted high rental yield as there are multiple other factors that will need to be considered. For example, whilst a high-yield property may produce a good cash flow, the chances of it increasing in profit are low when the time comes to sell it on.
It is also a good idea to factor in any extra costs into your budget, such as mortgage repayments. You will also need to build up an emergency fund for rainy days.
As a landlord, one of the biggest decisions you will need to make is where in the UK you want your investment location to be. According to data from Simply Business, a postcode in the following areas in 2023 is a good place to start:
- Manchester
- London
- Bristol
- Cambridge
- Peterborough
- Milton Keynes
- Luton
- Reading
- Southend
- Coventry
Simply Business found the data by comparing the following key factors to decide which property hotspot areas in the UK are worth your investment:
- Long-term returns through house price growth
- Short-term returns through rental yield
- Average total rent
- The percentage of the city population in the rental market
- The lowest number of vacancies as a proportion of total housing stock
As the UK’s leading property sourcing company, we can help you find investment properties across England and Wales. Join us today!
When looking for the best area to invest in, it is important to consider the rental yield you will be able to get from your investment.
According to data from Zoopla, these are the best area for buy-to-let in each region in 2022 according to rental yield.
- City of Nottingham, East Midlands – 6.49%
- Fenland District, East of England – 5.60%
- Barking and Dagenham, London – 5.12%
- Hartlepool, north east- 7.64%
- Burnley, North West – 7.92%
- East Ayrshire, Scotland – 8.48%
- City of Portsmouth, South East – 5.60%
- City of Plymouth, South West – 5.64%
- Blaenau Gwent, Wales – 7.02%
- City of Soke-on-Trent, West Midlands – 6.63%
- North East Lincolnshire, Yorkshire and the Humber – 6.72%
Before you decide to become a landlord, there are a few factors you will need to carefully consider:
Having a good security system in place:
This will be a benefit to both you and the tenant. The tenant will get a greater sense of security, and should the property be empty, you have the peace of mind that it is protected.
Cleaning service
Unless you are prepared to do the job yourself between tenants, it is a good idea to find a well-trusted cleaning service in the area that can get your property back up to scratch when you are left with an empty property.
Tradesman
Another element you will need to consider is breakages. Unless you are very handy with a toolbox, it may be a good idea to find some well-rated local tradesmen you will be able to call in case there are some serious breakages in the property.
Vetting your tenants
You should also be careful not to just take the first person you meet in as a tenant. It is wise to conduct interviews beforehand as well as background checks to ensure the person who will be living in your property will treat it with respect and care.
Whether or not being a landlord in the UK is worth it, boils down to personal circumstances. What works for one person may not work for someone else, so it is important to weigh up both the pros and cons of being a landlord before you commit to the investment. Below, we have outlined some of the pros and cons of being a landlord in 2023.
Pros
Regular income
The main advantage of being a landlord is the opportunity to earn a large income. It will mean that as long as your property is occupied, every month you will have a steady cash flow. This cash can be used to not only pay back the mortgage repayments on your current properties but also any outstanding mortgage repayments on your own properties. Plus, the more properties in your portfolio, the more cash you will receive monthly.
Allowable expenses
Whilst there are taxes that come with being a landlord, there are relief schemes available from the government to help offset this. It is a great advantage for landlords as it means that some of the pressure is taken off your cash flow when renting out properties as not all of your income will be subject to tax. These are referred to as ‘allowable expenses’ and cover the following:
- Utility bills
- Maintenance costs
- Agency fees
- Insurance payments
It is worth bearing in mind, however, that an expense will not be considered allowable if they relate to mortgage repayments or personal spending.
Independence
Another major perk to being a landlord is that you become your own boss, especially if you are renting out multiple properties. By being able to rent out several properties, you will become completely responsible for your own income which will mean you get to work your own hours manage your own business, set goals and make any and all financial decisions.
Security
It is a well-known fact in the world of property investment that house prices will fluctuate. Despite this, purchasing a buy-to-let property is viewed as one of the safest long-term investment options. People will always need somewhere to live, so it is an investment you will be able to keep for a long time with the certainty that there will always be someone to fill the place.
Cons
Emergencies
Whilst one of the biggest advantages of becoming a landlord is the aspect of steady income, you will also need to be wary that it also makes for unpredictable work as well. Should your tenants require emergency work on the property, you will be the one they call and it will be on your shoulders to fix.
Not only will you be responsible for fixing any emergencies as they pop up, but you will also be the one who is footing the bill. This means any broken boilers, washing machines, dishwashers, or even a blocked sink will be your responsibility to fix not the tenants.
There is the option to pay an external company to handle any issues like this that crop up, but this means you will be losing out on income as they will require a fee to do this.
Additional costs
Whilst mortgages and taxes are a big part of being a landlord, you will also need to consider the additional costs involved in purchasing a buy-to-let property. Upfront costs such as mortgage deposits, renovations, survey, and conveyancing fees will need to be factored in, as well as other costs associated with purchasing a new home like white goods and new furniture.
You should also be wary of overlooking the general costs you may incur when it comes to the general upkeep of your properties as well as the administrative costs for deposit protection, energy efficiency certificates, inventories, gas safety certificates, energy efficiency certificates, and agency fees. You will also need to take out landlord insurance to ensure the protection of your property. Even when your property is temporarily vacant, you will still have a mortgage to pay, so you will need to be conscious that whilst you may not be actively earning from the property, you will still have bills that need paying.
Taxes
As a UK buy-to-let landlord, you will be subject to mandatory income tax on the profits that you make from your properties. Income tax is a complex topic and is regularly updated in government budgets. As it varies from landlord to landlord, there is no one size fits all payment option, It is based on how much profit you make as well as your personal circumstances.
As soon as you start earning a profit from your rental home, you are required by law to tell HMRC and you may be required to submit a tax return. Exactly how much you pay will be based on which tax bracket you fall under.
As the chances are that you will own more than one property, you will be subject to higher stamp duty rates. As a landlord, you will be expected to pay more stamp duty than the average homeowner, including an extra 3% on the rates in each tax band. This heavy taxation can result in financial strain and administration work. External agencies are an option to help you cope with the extra administrative work, however, they will require a cut of the fees which can eat away at your final profit each month.
How Do You Save Money On Insurance For Landlords?
When searching for insurance for landlords, you should ensure you receive quotes from a broker or comparison engine, as this will save you time and money.
Prices vary depending on the insurance vendor, so you must find multiple quotes to make the best-balanced decision possible. Here are some other ways to save money on landlord insurance:
- Compare the market and do your research before accepting a quote.
- To avoid monthly interest charges, pay annually, not monthly.
- You can find discounts if you get all your coverage from one vendor.
- Only get the optional extras if you need them.
- To help avoid issues that could lead to a claim, you should keep your property well maintained as this will prevent increasing your insurance premium.
- Ensure any furnishings in the property are regulated and safe.
The world of investment can be the best investment decision you can make. The opportunity to earn extra cash as a landlord, paired with the security that a buy-to-let rental property brings, means that for many people becoming a landlord is worth it.
If you are ready to become a landlord today, then there is no better time to start looking for your next investment opportunity.
But if you are looking to invest with the best, then look no further…
Want to become a landlord? Or maybe you want to continue building a portfolio? Well as the UK’s leading property sourcing company, we can help you find investment properties across England and Wales. Join us today!
Alexandra Ventress
May 15th, 2023
Share this post
Start your property portfolio today!
Becoming a landlord is often regarded as one of the best investment decisions you can make in terms of security and longevity. However, it is not a decision to be taken lightly. Becoming a landlord means understanding the responsibilities you will need to undertake, as well as understanding the finer points behind it, such as rental yields.
But what do you find the highest UK rental yield? And how does the average property price affect tenant demand?
In this blog post, we will be looking at where in the UK you can find the highest rental yield, as well as looking at the pros and cons of becoming and landlord, and how we can make investment work for you.
When it comes to being a property investor, there are two main ways that you make a profit on your buy-to-let investment. This is through capital growth and rental income.
Capital growth is usually a long-term consideration, as many investors purchase with the intent to hold onto the property for many years. It is beneficial to buy-to-let investors as when the time comes to sell the property, they will have to deal with the high costs involved with selling.
Rental yield is the annual amount you can reasonably expect expressed as a proportion of the property market value. An example of rental yield would be a property that was on the market for £200,000. If on average tenants in the area would rent a property similar to this for £900, then the total annual rental income would be £10,800. This property would then provide a rental yield of 5.4% as £10,800 divided by £200,000 is 0.054.
There is no set price for how much a good rental yield in the UK is, as exactly how much your return will be depends on your expenditure, as well as the location of your property. As a rule of thumb, a good average rental yield is anywhere between 6% and 8% according to Natwest.
However, when it comes to choosing your first or next buy-to-let investment, you shouldn’t choose based solely on predicted high rental yield as there are multiple other factors that will need to be considered. For example, whilst a high-yield property may produce a good cash flow, the chances of it increasing in profit are low when the time comes to sell it on.
It is also a good idea to factor in any extra costs into your budget, such as mortgage repayments. You will also need to build up an emergency fund for rainy days.
As a landlord, one of the biggest decisions you will need to make is where in the UK you want your investment location to be. According to data from Simply Business, a postcode in the following areas in 2023 is a good place to start:
- Manchester
- London
- Bristol
- Cambridge
- Peterborough
- Milton Keynes
- Luton
- Reading
- Southend
- Coventry
Simply Business found the data by comparing the following key factors to decide which property hotspot areas in the UK are worth your investment:
- Long-term returns through house price growth
- Short-term returns through rental yield
- Average total rent
- The percentage of the city population in the rental market
- The lowest number of vacancies as a proportion of total housing stock
As the UK’s leading property sourcing company, we can help you find investment properties across England and Wales. Join us today!
When looking for the best area to invest in, it is important to consider the rental yield you will be able to get from your investment.
According to data from Zoopla, these are the best area for buy-to-let in each region in 2022 according to rental yield.
- City of Nottingham, East Midlands – 6.49%
- Fenland District, East of England – 5.60%
- Barking and Dagenham, London – 5.12%
- Hartlepool, north east- 7.64%
- Burnley, North West – 7.92%
- East Ayrshire, Scotland – 8.48%
- City of Portsmouth, South East – 5.60%
- City of Plymouth, South West – 5.64%
- Blaenau Gwent, Wales – 7.02%
- City of Soke-on-Trent, West Midlands – 6.63%
- North East Lincolnshire, Yorkshire and the Humber – 6.72%
Before you decide to become a landlord, there are a few factors you will need to carefully consider:
Having a good security system in place:
This will be a benefit to both you and the tenant. The tenant will get a greater sense of security, and should the property be empty, you have the peace of mind that it is protected.
Cleaning service
Unless you are prepared to do the job yourself between tenants, it is a good idea to find a well-trusted cleaning service in the area that can get your property back up to scratch when you are left with an empty property.
Tradesman
Another element you will need to consider is breakages. Unless you are very handy with a toolbox, it may be a good idea to find some well-rated local tradesmen you will be able to call in case there are some serious breakages in the property.
Vetting your tenants
You should also be careful not to just take the first person you meet in as a tenant. It is wise to conduct interviews beforehand as well as background checks to ensure the person who will be living in your property will treat it with respect and care.
Whether or not being a landlord in the UK is worth it, boils down to personal circumstances. What works for one person may not work for someone else, so it is important to weigh up both the pros and cons of being a landlord before you commit to the investment. Below, we have outlined some of the pros and cons of being a landlord in 2023.
Pros
Regular income
The main advantage of being a landlord is the opportunity to earn a large income. It will mean that as long as your property is occupied, every month you will have a steady cash flow. This cash can be used to not only pay back the mortgage repayments on your current properties but also any outstanding mortgage repayments on your own properties. Plus, the more properties in your portfolio, the more cash you will receive monthly.
Allowable expenses
Whilst there are taxes that come with being a landlord, there are relief schemes available from the government to help offset this. It is a great advantage for landlords as it means that some of the pressure is taken off your cash flow when renting out properties as not all of your income will be subject to tax. These are referred to as ‘allowable expenses’ and cover the following:
- Utility bills
- Maintenance costs
- Agency fees
- Insurance payments
It is worth bearing in mind, however, that an expense will not be considered allowable if they relate to mortgage repayments or personal spending.
Independence
Another major perk to being a landlord is that you become your own boss, especially if you are renting out multiple properties. By being able to rent out several properties, you will become completely responsible for your own income which will mean you get to work your own hours manage your own business, set goals and make any and all financial decisions.
Security
It is a well-known fact in the world of property investment that house prices will fluctuate. Despite this, purchasing a buy-to-let property is viewed as one of the safest long-term investment options. People will always need somewhere to live, so it is an investment you will be able to keep for a long time with the certainty that there will always be someone to fill the place.
Cons
Emergencies
Whilst one of the biggest advantages of becoming a landlord is the aspect of steady income, you will also need to be wary that it also makes for unpredictable work as well. Should your tenants require emergency work on the property, you will be the one they call and it will be on your shoulders to fix.
Not only will you be responsible for fixing any emergencies as they pop up, but you will also be the one who is footing the bill. This means any broken boilers, washing machines, dishwashers, or even a blocked sink will be your responsibility to fix not the tenants.
There is the option to pay an external company to handle any issues like this that crop up, but this means you will be losing out on income as they will require a fee to do this.
Additional costs
Whilst mortgages and taxes are a big part of being a landlord, you will also need to consider the additional costs involved in purchasing a buy-to-let property. Upfront costs such as mortgage deposits, renovations, survey, and conveyancing fees will need to be factored in, as well as other costs associated with purchasing a new home like white goods and new furniture.
You should also be wary of overlooking the general costs you may incur when it comes to the general upkeep of your properties as well as the administrative costs for deposit protection, energy efficiency certificates, inventories, gas safety certificates, energy efficiency certificates, and agency fees. You will also need to take out landlord insurance to ensure the protection of your property. Even when your property is temporarily vacant, you will still have a mortgage to pay, so you will need to be conscious that whilst you may not be actively earning from the property, you will still have bills that need paying.
Taxes
As a UK buy-to-let landlord, you will be subject to mandatory income tax on the profits that you make from your properties. Income tax is a complex topic and is regularly updated in government budgets. As it varies from landlord to landlord, there is no one size fits all payment option, It is based on how much profit you make as well as your personal circumstances.
As soon as you start earning a profit from your rental home, you are required by law to tell HMRC and you may be required to submit a tax return. Exactly how much you pay will be based on which tax bracket you fall under.
As the chances are that you will own more than one property, you will be subject to higher stamp duty rates. As a landlord, you will be expected to pay more stamp duty than the average homeowner, including an extra 3% on the rates in each tax band. This heavy taxation can result in financial strain and administration work. External agencies are an option to help you cope with the extra administrative work, however, they will require a cut of the fees which can eat away at your final profit each month.
How Do You Save Money On Insurance For Landlords?
When searching for insurance for landlords, you should ensure you receive quotes from a broker or comparison engine, as this will save you time and money.
Prices vary depending on the insurance vendor, so you must find multiple quotes to make the best-balanced decision possible. Here are some other ways to save money on landlord insurance:
- Compare the market and do your research before accepting a quote.
- To avoid monthly interest charges, pay annually, not monthly.
- You can find discounts if you get all your coverage from one vendor.
- Only get the optional extras if you need them.
- To help avoid issues that could lead to a claim, you should keep your property well maintained as this will prevent increasing your insurance premium.
- Ensure any furnishings in the property are regulated and safe.
The world of investment can be the best investment decision you can make. The opportunity to earn extra cash as a landlord, paired with the security that a buy-to-let rental property brings, means that for many people becoming a landlord is worth it.
If you are ready to become a landlord today, then there is no better time to start looking for your next investment opportunity.
But if you are looking to invest with the best, then look no further…
Want to become a landlord? Or maybe you want to continue building a portfolio? Well as the UK’s leading property sourcing company, we can help you find investment properties across England and Wales. Join us today!
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Looking for the best places to invest in property?
Looking to get into the wonderful world of property investment? Or perhaps you are a seasoned investor looking for their next buy-to-let opportunity? Whatever your motivations, we are here to help.
When the foundations of your company are built upon industry knowledge and experience, you can’t help but be a self-confident company.
Here at The Property Sourcing Company, we are led by a roster of industry experts who have over 50 years of combined experience in doing BMV property deals, as well as packaging them up for investors.
Quality sits at the heart of our team, who go the extra mile to tailor our service to you. We pride ourselves in our ability to source you a wide variety of high-yield property investments.
Get in touch and we’ll establish what type of property you’re searching for, before talking you through our current investment opportunities. We’ll also keep you posted as we acquire new deals.
When you buy your investment property through us and we’ll take care of solicitors, surveys – everything – all to ensure you have a stress-free property purchase. It’s just one of the ways we make investment work for you.
Why invest with us?
Simply put, we’ll get you the best possible deal. Our sister company, The Property Buying Company, have been in the property buying industry for years & we have access to all their stock which is at a price point that is ready for investors to buy and make a great return on.
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