Recent research suggests that if you're a Buy-to-Let (BTL) property investor, then a good place to start your investment journey, is with two-bedroomed properties. Why? Because they provide the optimum rental yield versus investment. Of course, that's not true of every area across the UK, but on average, two-bedroomed properties can deliver the best rental yield for many landlords.
When existing and potential BTL investors are considering which type of property to buy, aside from the initial outlay, the main detail to weigh up is yield. The higher the annual yield, the better the investment. However, with property prices currently pretty high, even though rents are high and still climbing, it’s still not always possible to find a yield anywhere near 5%, which is a figure that many investors will likely be aiming for.
According to these recent figures though, on average, two-bedroom rental properties can get you very close to that level of yield, which is good news for investors.
Average BTL yields
If you’re targeting a yield of around the 5% mark, then a two-bedroomed property, purchased at the right price in the right area and with the right rent level, could net you an average yield of 4.8%. That’s well above the 3.6% average yield that’s typically available on rental properties of 4 bedrooms or more (rented out as a single property and a not a Home of Multiple Occupation (HMO).
If you invest in a one-bedroom property, the average potential annual yield you could collect is around 4.1%. Meanwhile, if you buy a three-bedroomed home to rent out, then it could deliver a 4.5% annual yield.
Of course, there are also regional differences. The north east of England is calculated as the most potentially lucrative area to invest in a two-bedroom BTL property, with a potential average yield of 5.5% available for the savviest among you. North west England follows close behind with an average yield of 5.3% for two-bedroom properties. Meanwhile, if you buy a two-bedroom home in Yorkshire and the Humber to rent out, you could enjoy a yield of around the 5.2% mark.
For two-bedroom properties in London, the average yield is calculated at 4.5%. However, while the percentage is lower than in the north of England, the actual amount of money will most certainly be higher, due to the price discrepancies between home values and rents in the two regions.
“As a landlord, maximising the profitability of your buy to let investment is as vital now as it’s ever been and property size and type are as important as location when it comes to doing so,” said Calum Brennan, CEO of Howsy, who conducted the BTL yield research.
When other size properties can deliver on yield
While it’s good to have some research available to support your property investment decisions, it’s important to recognise that good yields and returns on investment are available across all types of property sizes and UK regions; you just need to know your area and target market.
For example, student properties in areas popular with students in big student towns and cities can deliver excellent yields, even above that 5%. However, when you’re renting out an HMO to students, it’s a different situation than renting out an apartment to city workers or a family home close to good schools.
Short-term lets also have the ability to deliver stellar yields to investors; provided those properties are in the right location, bought at the right price and rented out to the right market. As always, it’s essential that property investors:
- Do their research.
- Understand their tenant market.
- Get all the numbers right.
- Manage it in the best way for their target market.
If you do this, whether you’re an old hand or a new investor, you’ll achieve the yields you want and secure a business that definitely has legs.
