What type of properties offer the best yields for landlords?

What type of properties offer the best yields for landlords?

Landlords can get excellent returns from a wide variety of properties, but according to recent research, some properties bring better returns than others. The Lettings Platform Howsy carried out a study where they looked into the type of properties that offer the best returns.

In their study, Howsy looked into current rental returns across one-, two-, three-, and four-or-more bedroom properties. The lettings platform looked at the average cost of buying each property type and monitored the average rent that they bring it while comparing them on a regional level.

According to the study, two-bedroom properties were the best option for landlords who were looking to maximise their rental returns. Howsy found that, on average, two-bedroom properties across the UK offered a rental yield of 4.8 per cent. This was closely followed by three-bedroom properties that offer average yields of 4.5 per cent and one-bedroom properties which offer average yields of 4.1 per cent. Properties with four bedrooms or more offered the lowest average yields of 3.6 per cent. It should come as no surprise that two- and three-bedroom properties have been named as the optimal types of properties for buy-to-let landlords. In a study carried out by Zoopla last year, it was revealed that tenants preferred two- and three-bedroom properties as they cater for a wide variety of tenants – from families to young professionals looking to house share. Smaller properties tend to be more affordable and require less maintenance than properties with four or more bedrooms.

However, the picture looked a little different in London, where one-bedroom properties appeared to be the most lucrative for landlords. This could be put down to the demand for smaller properties in the capital that achieve considerably higher rents than the rest of the country.

Elsewhere in the country, it was landlords in the North of England that saw the biggest benefit of investing in a two-bed property. The North East saw two-bedroom properties in the area achieving average rental yields of 5.5 per cent. This was followed by the North West where two-bed properties were achieving yields of 5.3 per cent and Yorkshire and the Humber where they were achieving 5.2 per cent. The North West has the strongest yields for three-bedroom properties at 4.9 per cent and if a landlord is in the market for a property with four bedrooms or more, then they would need to look in Yorkshire where properties of this kind achieved average yields of 4.3 per cent.

Calum Brannan, founder and CEO of Howsy, said: ‘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.

“While the two-bed property is traditionally the most popular amongst tenants and landlords due to the additional size without going overboard on costs, there is a slight regional variation in the capital.

“This is of course, due to the high rents you can secure in London even on a one bed and the overwhelming demand for properties that have seen even the smallest ‘studio flats’ rent for above-average prices.’

While different investment options work for different landlords, this certainly gives a good indication of what type of properties are best for buy to let investment across the country.

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