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Buy-to-let investors may have to look to alternative regions if they want to secure a decent yield from their property.

Research by Direct Line for Business showed rental yields varied significantly depending on where investors bought.

Direct Line found that while house prices had risen 17 per cent over the past three years, rents were up just 4.7 per cent.

While the average yield achieved across the UK is 3.6 per cent, some buyers could earn as much as 7.1 per cent.

Burnley had the highest annualised rental yield in the country, according to the analysis. Average house prices in the town were £76,300 while the typical annual rent landlords could achieve was £5,388.

Making up the rest of the top three are the City of Glasgow and Belfast where yields were 6.9 per cent and 6.4 per cent respectively.

By comparison, homes in London, the south east and east of England had the poorest yields, largely because property prices were higher.

In London landlords achieve average annual rents of more than £20,000 but, with the average house price more than £480,000, the yield was 4.4 per cent.

In the east of England, where the typical property cost £289,000, the average rent was the lowest in the country at just 3.5 per cent.

Daniel Bailey, principal at Middleton Finance, said: “Most of my buy-to-let investors don’t tend to pay more than £125,000. If they go beyond that then the yield tends to not be as good.

“Purchase price is a major factor and some areas will attract a better monthly rent. I have some clients achieving yields of 7 to 10 per cent .

“There are still good yields to be achieved but it is important to speak to a broker and property tax expert to understand all of the implications.”

Direct Line said increased competition in the private rented sector was hitting yields.

Christina Dimitrov, business manager at Direct Line for Business, said: “While property prices have increased in recent years, it’s a different story for the rental markets where growth in rents in lower than wage growth.”

Source: FT Adviser

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