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Becoming a Landlord: The Best Buy-to-Let Areas Right Now

Being a landlord is something many dream about. The idea of building a property portfolio is an appealing one, with the potential to increase annual revenue while also providing a valuable asset. However, when it comes to being a landlord, it also takes a lot of time and expertise.

If you have decided that 2018 is the year to finally make that leap and invest in property, then you need to be prepared to do your research. After all, the yield and success of your first investment could determine your future as a landlord.

To help you on your journey to becoming a landlord, here are the hottest, up-and-coming, and highest rental yield areas in the UK – and they are all in the north.

Liverpool

According to recent data, Liverpool is currently the most profitable city in terms of rental yields. With Liverpool offering higher than average returns, certain postcodes could prove to be more lucrative than others.

Scooping the highest and second-highest rental yields in the UK, L7 and L6 topped the list, at 11.79% and 11.52%. While LS1, LS2 and LS3 all came in above the national average, between 7.34% and 9.36%.

Middlesbrough

Next on the list is Middlesbrough. This relatively small, industrial town may not immediately come to mind when thinking about where to buy, but with low house prices and a popular rental market, it could offer a solid investment.

One area in particular, TS1, can produce yields of almost 11%, making Middlesbrough an enticing possibility for first time landlords.

Edinburgh

Want to invest in a capital city where rental properties are in high demand? While London is experiencing its first falls in rent for eight years, the rental market in Scotland’s capital is thriving.

In particular, the postcode area of EH8 is currently providing average rental yields of an impressive 10.63%, while EH9, EH11, EH12 and EH16 hover around 8%.

Manchester

The biggest city in the northwest, Manchester has long been a popular pick for landlords who are looking to make a profitable investment, and it seems that the city is still a wise choice.

In particular, M14 offers the fifth-highest rental yields in the country, with an average of 10.08%. While M19 and M20 offer a respectable – and attractive – 8.6% and 7.09%.

Newcastle

Last on our list is Newcastle. This bustling northern city is a popular rental spot, with some areas offering low asking prices and high monthly rents, making it an ideal location for landlords.

This includes NE6 where the average yield for 2018 sits at 9.48%, which is far above the UK’s median figure of 3.6%.

University Cities

In addition to the five locations above – where the most lucrative postcodes are also home to that city’s university – university cities as a whole appear to offer the highest rental yields for landlords. This means it may also be worth considering other northern cities with large student population, such as Hull, Huddersfield and Sheffield – three locations that are currently proving to be popular with landlords.

Landlord Tips

Finally, becoming a landlord can be a profitable and rewarding experience. However, while these areas currently offer the highest rental yields in the UK, before investing, always do your sums. This includes expenses and fees, seeking advice from local experts like Allsop, as well as ensuring your property meets new rules and regulations.

Source: News Anyway

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Winchester has the most vulnerable rental market

Winchester is home to the most vulnerable rental market as tax changes magnify the threats to landlords, Gatehouse Bank has found.

Tax changes including the second home surcharge and tapering of mortgage interest relief have constrained the buy-to-let market in recent years, resulting in an environment where yield alone can no longer be the primary consideration.

Winchester offers landlords the hardest won gains followed by Cambridge, Chichester, Warwick and Reading.

Charles Haresnape, chief executive at Gatehouse Bank, said: “What our research shows is that famous Northern hospitality is not a myth. It’s a great place not only to be a landlord but also to live, with cities in the North and the Midlands performing much better across all indicators.

“Rental properties are let far quicker than in the South, which is no surprise when major cities like Liverpool and Manchester are within commuting distance of smaller towns like Bootle.

“What’s really striking is that in the areas that performed best, rental rates were far more affordable and this correlation underscores the symbiotic relationship between renters and landlords in areas where their investments could be deemed safest.”

The study takes into account the second tier of economic indicators including how long available rentals have been on the market, as well as the affordability ratio between average salaries and rents.

This is in contrast to studies that look solely at yield, which would currently identify Padstow, Bedford, Taunton, Shrewsbury and Salisbury as making up the least attractive buy-to-let hunting grounds.

These locations ranked well above the bottom, placing 49th, 100th, 95th, 40th and 78th respectively.

Meanwhile, the North and Midlands dominated the listings of the places where landlords are least vulnerable. Bootle in Merseyside emerged as the best place to offer rental property followed by Inverness, Stoke-on-Trent, Barnsley and St Helens.

In Winchester properties for rent have been sitting on the market for almost a third longer (248 days) than in favourable Bootle (183 days), where the average yield was 5.6% compared with Winchester’s 3.1%.

Of the UK’s major cities, Manchester ranked 34th, Birmingham lay in 75th position, with Glasgow ranked 43rd. London – where high property prices famously shrink yields and deter landlords – ranked 89th.

Renters in Edinburgh and London pay the highest rents compared to earnings. These cities came bottom (121st and 122nd) when ranking this indicator, with rents coming in at 73% and 92% of local average earnings respectively.

Meanwhile Oxford (70.8%), Guildford (69.3%) and Brighton (66.6%) all fell into the bottom five.

In contrast, the top three cities for affordability, all of which are based in the North of England, boast earnings-to-rent ratios that are three times less.

Renters in Hartlepool, Darlington and Stockton-on-Tees make up the top three. Tenants in these areas can expect rents that are 17.5%, 19.6% and 19.9% of earnings respectively.

Overall, the study found properties available to rent across the UK have been sitting on the market for 197 days on average. Meanwhile the typical yield is 4.6% and the average proportion of earnings to rent is 37%.

Source: Mortgage Introducer

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Rental yields hit three-year high

The average rental yield achieved across the UK in the second quarter of 2018 was 6.2% – the highest level seen since the end of 2014, said BM Solutions, in its quarterly report produced with BDRC.

Landlords in Wales are generating the highest rental yields of 6.9%, followed closely by the East of England at 6.7%.

Yields are lowest in the North East (5.7%) and the South East (5.8%).

Overall confidence from landlords in their own lettings is at its highest level for 18 months and 8% up on a year ago, said the lender.

Tenant demand variable

Perceptions of tenant demand vary significantly across the country, with landlords in the East and West Midlands most likely to have experienced an increase in demand over the last three months (42% and 33% respectively).

However, in Scotland there has been a 15% fall in perceived tenant demand by landlords, and those in London and the North East are similarly lacking in confidence over demand.

Phil Rickards, head of BM Solutions, said: “It is encouraging to see that confidence across all of the key indicators has either increased or stayed the same on a 12 monthly basis and is particularly strong when landlords are considering their own lettings business.

“It’s a promising sign for landlords that rental yields are on the increase and are recovering some of the ground they have lost in recent years.”

Average rental yields per region 

Property location %
Wales  6.9
East Midlands  6.7
East of England 6.4
Scotland 6.4
North West 6.2
West Midlands 6.2
Yorks & Humber 6.2
London (Central) 6.2
South West 6.0
London (Outer) 5.9
South East (excl London) 5.8
North East 5.7

Source: Your Money

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Liverpool and Nottingham top league table of buy-to-let hotspots

Liverpool and Nottingham are the UK’s best performing locations for landlords with average net rental yields of 6.2 per cent, the latest analysis of buy-to-let hotspots by Private Finance shows.

Overall rental yields in the top 10 locations in the country have increased by an average of 0.9 per cent since May 2017 with the biggest increase of 2.2 per cent recorded in Southampton where rents are rising faster than house prices.

Nottingham is now joint top after moving up from second position due to a £121 increase in average monthly rents.

Cardiff, with a net rental yield of 6 per cent, comes third, followed by Southampton and Greater Manchester both at 5.9 per cent.

Shaun Church, director of Private Finance, said: “Finding the right buy-to-let location is a careful balancing act.

“Too large an initial investment makes it difficult to achieve a healthy yield, but landlords must also be confident that property values will appreciate at a higher rate than mortgage borrowing to achieve a long-term profit.

“Strong rental demand is also key to prevent lengthy void periods that can damage affordability.

“While there has been some movement in the top 10 buy-to-let hotspots, larger cities and university towns tend to offer the greatest opportunity for investors as they offer the highest rental demand.

“Although the buy to let sector is facing many challenges, one area where landlords have benefited is falling mortgage rates.

“However, seeking independent advice is becoming increasingly important for landlords to find and be accepted for the best deals.

“With house prices on the rise, too large a loan can negate any savings made from low rates, so landlords need to consider all aspects of their mortgage.”

There was a slight increase in average mortgage rates towards the end of 2017 as November brought the first interest rate rise in 10 years, up to 0.5 per cent.

However, Bank of England data shows the average two year 75 per cent loan to value buy-to-let fixed rate is at its lowest point at 2.47 per cent since tracking began in January 2012 and has fallen by 2.62 per cent since May 2017.

As a result, many landlords across the UK will have seen their annual mortgage costs fall.

Within the top 10 hotspots, Brighton and Hove has seen the biggest reduction in mortgage costs. Despite a 2.1 per cent increase in house prices in the area in the past eight months, meaning the size of a 75 per cent loan has increased, as a result of falling mortgage rates a landlord would now pay £6,681 in interest annually compared to £6,993 last May, a saving of £312.

Source: Simple Landlords Insurance