7th December 2020
What is a good rental yield in the UK?
When you’re considering venturing into the world of buy-to-let, there are so many important factors to consider. But the number one thing on your mind is likely to be – ‘is this a good investment for me?’ and ‘what will the return be?’ We sat down with Andy Thompson, our Head of Auctions (North West) to create this guide of the best areas to buy property in the UK to gain a decent rental yield.
To break it down, rental yield is the return made on a property investment in terms of monthly rent charged compared to the value of the property/price paid. As a general rule of thumb, a rental yield of around 7% or higher tends to be considered a very good yield for a buy-to-let property.
Rental yield can be calculated by taking the annual rental income of a property, dividing it by the price paid and then multiplying this number by 100. So for example, for a property that costs £140,000 with a monthly asking rent of £600, the yield will be 5.1%:
£600 x 12 = £7,200
£7,200 / £140,000 = 0.051 x 100 = 5.1
If you’re a landlord looking for the best cities in the UK to purchase buy-to-let property, then you’ve arrived at the right place. In the table below, we outline the major cities of the UK, ranked by rental yield to better inform your decision on the area to invest in next.
|Rank||City||Avg. Property Value (Zoopla)||Avg. Rent PCM (Home.co.uk)||Avg. Annual Rent||Yield %|
|6||Newcastle upon Tyne||£215,685||£1,163||£13,956||6.47%|
Figures in this table are based on average values and costs and provide an indication of the potential rental yield in each city. Rental yield will vary according to the value of each individual property. These figures have been calculated without the consideration of any mortgage costs.
With very close results, Manchester and Nottingham take the top two spots with rental yields of 7.29% and 7.28% respectively, making them both great places to invest in property if you’re considering taking that first step towards owning a buy-to-let property.
Next up in third place is Portsmouth, with an average monthly rental asking price of £1,427 and an average property value of £242,330 landlords can earn a potential yield of 7.07%, a very decent percentage when compared with the mid-range of the table.
It is worth drawing attention to the capital cities of Edinburgh and London as both have seen significant drops in average monthly rental asking prices over the last year, meaning their potential rental yields have also dropped. This is likely due to fewer people renting in the city as a result of Covid-19 closing many businesses and offices. Because of this development, we recommend searching for properties in smaller cities, many of which have seen an increase in rental prices such as Newcastle Upon Tyne and Birmingham.
Cities in the table from Bristol to Chester reflect the mid-range point of yield potential across the UK, from 6.88% down to 4.58% – while these are lower than the top 3, these areas are definitely still worth checking out as it may just pay off when relative to an individual property’s price.
While the figures outlined above are based on the average costs across the UK, often the properties we sell at auction can be purchased for less than this. This means that there is potential for you to get an even greater yield, particularly in the areas that are performing well currently.
We sell properties from all over the UK in our live-streamed property auctions and our online timed auctions. With a huge range of unique properties being added everyday, there isn’t a better, more profitable way for you to expand your property portfolio.