Ambitious buy-to-let landlords should head to Birmingham for the biggest yields, new research shows.
A report from property group Move with Us and search engine Home.co.uk reveals that the city has three postal districts in the top ten rental yield hotspots. Most lucrative of all is the B7 area, where landlords are pulling in 10.6 percent.
The district's closely tailed by the TN28 area of Kent, with a yield of 10.5 percent, the Merseyside postcode of L14 at 9.6 percent and the Surrey postcodes GU6 and RH4, which offer 9.5 percent and 9.1 percent respectively.
The study, which looked at the sale prices and rental values for two-bedroom properties, concluded that the highest yields are scattered widely, mainly in areas outside Greater London. But in some rural districts, such as the Brecon Beacons, rural Devon, the Peak District and the Yorkshire Dales - which tend to attract homeowners rather than young renters - yields are as low as two percent.
"Landlords clearly need to be open-minded about where to invest and not simply look in their immediate area," says Doug Shephard, Director at Home.co.uk. "A highly localised approach identifying the ultimate combination of in-demand property types, lower capital investment and higher rental prices will deliver good yields and fewer voids, and maximise potential returns."
"Landlords looking to maximise yield will need to look outside of Central London," says Sean King, chief executive officer at Move with Us. "Commuter belts to the west and east of London are clearly yield hot spots, as renters look to access the capital's work and social opportunities without the cost of renting a central London property."
However, according to Caroline Kavanagh, managing director of south-east-based estate agency Townends Lettings and Management, tenants are getting fussier and sticking out for the best deal. Landlords, she says, should feel pleased with themselves if they're managing to get any more than four percent.
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"Landlords have had to be more realistic in the last few months and adjust their expectations and prices accordingly in order to maintain their competitive edge," she says. "Price fluctuation within the rental market is the nature of the business, and shrewd landlords will work this into their business model."
The top 10 yielding postal districts in England and Wales
1 B7 (Birmingham) 10.6%
2 TN28 (Kent) 10.5%
3 L14 (Merseyside) 9.6%
4 GU6 (Surrey) 9.5%
5 TS1 (Middlesbrough) 9.2%
6 B35 (Birmingham) 9.2%
7 L4 (Liverpool) 9.1%
8 RH4 (Surrey) 9.1%
9 B18 (Birmingham) 8.7%
10 EN8 (Hertfordshire) 8.7%