Whether you’re looking to invest in your first buy-to-let property or already have an extensive portfolio, a strong rental yield will be a defining metric you use when making your choice.
The question is, how do find the areas with the highest rental yields? Well, luckily we’re here to share the latest research on the areas with the highest buy-to-let rental yields.
Of course, knowing the rental yields is only half the battle. If you really want to be a successful property investor, you also need to understand why an area’s rental yield is so strong.
For that reason, we’ll also be diving into some of the telltale signs you’ll want to look for when identifying the next property hotspot for yourself.
If you’d rather take a broader look at where the best rental yields can be found, a good place to start is looking at some of the most popular investment cities.
This is something we’ve covered in more depth in a previous blog, but for now, here are our top picks for the areas you should be investing in.
Leeds is a city that’s flown under the radar when it comes to property investment, but experts are tipping the northern city to become far more popular in 2019 and belong.
The city has a thriving student population with four universities and for a location that’s supposed to not be very popular, rental yields reach as high as 7.43%. This isn’t bad when you consider that this is a baseline on property that’s expected to be in more demand in the coming years.
Manchester has around 100,000 students and high graduate retention rate, meaning there is a strong pipeline of young professionals that need a place to live.
As one of the fastest growing cities in Europe, there is no lack of new developments to make the most of, and with an average rental yield of 7.07% for areas like Fallowfield, Moss Side, Ladybarn, Rusholme and Victoria Park, it’s hard to choose an area of the city that won’t deliver a return on your investment.
A total of six postcodes featured in Totally Money’s top 25 rental yield areas. If that proves one thing, it’s that Liverpool’s popularity isn’t confined to one area.
A range of public and private investment initiatives are rejuvenating the city, driving even more footfall and contributing to the exceptional growth of the economy, which is the fastest of any non-capital city in the UK.
This is all summed up with a rental yield high of 9.79%.
As I mentioned, understanding what goes into a great rental yield is an important part of being able to identify up and coming areas. With that in mind, here are the telltale signs of areas primed to become rental yield hotpots.
The number of universities has a significant impact on rental yield, as it generally corresponds with a greater number of students in the area.
This is an obvious benefit for buy-to-let investors looking to target the student demographic but there is also a lasting benefit. Both local authorities and universities are taking steps to improve their graduate retention rate and keep talent in the area.
Locations with a high number of universities and a high retention rate often see greater investment because there is an ever-present stream of high-educated young professionals working in the area.
This makes cities or towns with a large number of universities very attractive to businesses who want to open in locations with access to a high number of ambitious employees.
It’s been a long time since people moved to city centres only to be closer to their work. Now, living in a centre is expected to come with a great social scene.
For that reason, more and more areas of the UK are trying to catch up with big cities like Manchester or Liverpool and investing in commercial property for food, drink and other social enterprises.
And it’s no wonder why when you consider how much of an impact this has had in the past. For example, Newcastle’s population growth of 112% between 2002 and 2015 was driven by attracting young people using its social reputation.
Commuter towns have been around for a while, but they have always been the territory of families. Now, though, this is changing.
As more and more young professionals become disillusioned with the comparatively high cost of city centre living, towns with strong transport links are growing in popularity with this new demographic.
In the North West, areas like Warrington and Preston are perfectly positioned to allow professional and social access to Liverpool and Manchester by train. This makes both locations attractive to young professionals who want more for their rent.
In Greater Manchester, the addition of Metrolink stations has been seen to have a significant impact on demand for property, so if you can identify new transport links early, you may be able to get what could be great rental yield cheap.
Clearly, investment from big businesses is a strong indication that an area is up and coming. New investment means new jobs, which attracts new people and increased demand for property.
Brexit is currently making it difficult to predict which area will see this kind of investment next, but we already know of a few examples, such as Amazon and Travelodge moving into Edinburgh.
Finding information about the areas with the highest rental yields isn’t difficult, but by the time you can act on this information, the best deals are typically gone.
For that reason, the best property investors use their own experience and instincts to identify up and coming areas based on the metrics laid out in this article.
There is another way, though. Speaking to property investment experts is a quick way of identifying areas primed for success. Speak to one of the TRG team today to learn more.