Fri 06 Sep 2019
With rents increasing by 1.3% on an annual basis in May according to the Office for National Statistics, buy-to-let property remains a solid investment opportunity despite recent predictions about the market.
If you’re thinking of becoming a landlord, or increasing your existing portfolio, the first thing you’ll need to consider is the type of property you’d like to buy. A key factor in this decision should be the potential yield that the property could return.
Houses with two or more bedrooms are the most popular choice for renters in the current market, particularly among families. As the average age of first-time buyers is now 30, more and more young families are renting, so a house would make a sound buy-to-let investment – especially if it is close to a school. Families often stay in the same property for several years, ensuring that you’ll get stable rental income and fewer void periods.
If you’d prefer to invest in a smaller property, consider purchasing an apartment in a more central location. Properties close to a train station tend to achieve high rental yields, as competition for this type of property – usually among young professional tenants – will keep prices high. Although tenancies in apartments are often shorter than in houses, void periods should not be an issue due to the competition within the market for this type of accommodation.
Another option to consider would be a large property to be let as a House in Multiple Occupation (or HMO). In this instance, individual rooms within the property would be let out on separate tenancies, raising the rental yield and reducing void periods.
Traditionally, HMOs were rarely seen outside of the student lettings market, but they are now becoming more popular – especially in the capital. Young professional sharers are a growing demographic within the rental market, and tend to favour this type of property.
According to the National Landlords’ Association, average rental yields sit at 6.9% for HMOs, around 1.3% higher than other properties. However, there are other considerations if you are thinking of buying a property with a view to let it out to multiple independent occupants, as some HMOs will require a license, obtainable from the local council.
If you have a property which would be suitable as an HMO, our Prime department would be able to source tenants for you, and you can read more about them here.
Fundamentally, there is no single type of property which is guaranteed to give you the best rental yield. Individual landlords tend to favour different properties, and yield can vary from area to area.
If you are considering purchasing a new buy-to-let investment, our teams can advise you on the most suitable opportunities and help you select the best property for your circumstances. You can discuss this with our sales team here and our lettings team here.