Best Buy-to-Let Areas
If you’re an investor thinking of purchasing a rental property, it’s important to explore the best buy-to-let areas in the UK before making any decisions.
In this article, we outline: what you should be looking for in a buy-to-let property, new opportunities for landlords, and take a look at the best buy-to-let investment areas in the UK right now.
Buy-to-let investment is one of the most popular strategies in the UK and compared to other investments, the property remains a relatively safe, secure, and profitable place to put your money.
With a BTL property, it’s possible to gain ongoing monthly income from rent, as well as capital gains when it comes to the sale, making owning a rental property an appealing prospect. As it currently stands, the UK housing market offers plenty of buy-to-let opportunities, even though tax changes in recent years have put a tighter squeeze on landlords’ profits compared to previous decades.
As of 2021, there were around 4.4 million households privately renting, and with the housing market remaining robust, there will always be a steady stream of tenants looking to rent a property.
What to look for: Buy-to-let Advice
When looking into the best areas for buy-to-let, investors should consider a few important factors.
Rental Yields
Rental yield is important because you’ll want to make sure that the monthly rental income you receive from a property will cover its outgoings and expenses – everything from repairs, to taxes, to repayments like the mortgage – while leaving you with some profit.
To boost rental yield, ideally, you would invest in real estate that comes in at a low property price and delivers high rental income.
Rental yield is calculated as a percentage by dividing the rental income by the price paid for the property (or you can use a rental yield calculator). Be sure to calculate the net rental yield to get an accurate view of a potential investment.
Generally, investors should be looking to achieve rental yields of at least 5% – this will ensure that a property can cover outgoing expenses.
The higher the rental yield, the more sustainable your property is likely to be for the long term. A rental yield lower than 5% makes it harder to cover the expenses associated with a property and turn a profit. Read more about what makes a good rental yield in this article.
Location
There are several areas of the UK currently offering yields of 7% and higher – an ideal percentage to ensure your buy-to-let property is working for you. Recently, investors have turned their attention to the UK’s northern cities.
Cities in the North are currently offering some of the best yields, particularly when compared to previous hotspots like London, alongside growing house prices that have the potential to deliver attractive capital gains when it comes time to sell.
Manchester and Liverpool are two of the most popular cities for investors now, with yields of around 8%. Sheffield and Leeds are also offering yields of 7% and higher, while Newcastle and Hull remain steady at 6%. These cities have recently seen an influx of investment, with businesses moving in and new developments being built, creating a thriving environment for landlords.
New Buy-to-Let Investment Opportunities for Landlords
As well as choosing the best buy-to-let areas in the UK, landlords can maximise their potential to generate higher yields by undertaking renovations and updates to make the property more appealing to tenants.
Ways to boost rental income include ensuring the property has:
- a modern kitchen
- bathroom and
- updated decor
Since the start of the pandemic and several national lockdowns, many tenants have shifted their expectations as to what they seek out in a property. With the changing needs of renters, investors have new investment opportunities, whether exploring new locations or different types of property.
When considering the best areas for buy-to-let returns, it’s important to get to grips with shifts in rental demand that have come about in the past 18 months. This includes things like:
- tenants placing preference on larger properties with outdoor space
- and homes that offer a space for an office to fit in with flexible working trends.
- a good internet connection and up-to-date appliances
- flexibility, such as short-term leases or the ability to move in quickly
Which UK Postcodes Offer the Best Buy-to-Let Areas?
The UK’s northern cities are currently considered to be the best buy-to-let areas in terms of rental yields, the potential for property price growth and the ongoing demand of the rental market.
Predictions state that, in general, the North -region will see house prices rise by 24% through to 2024, outpacing the rest of the UK. The Northern cities have seen a steady influx of young professionals who are looking for attractive and affordable places to live. The strong economic growth in the area has also helped to boost the property market, with house prices increasing at a steady rate.
Furthermore, due to the close proximity of the northern cities to major cities such as London, there is an increasing demand for rental properties from commuters who are looking for convenient housing options near public transport links or other amenities.
Here are some of the UK postcodes with the best buy-to-let investment areas right now:
Best Buy-to-Let Areas in Liverpool: L7, L6, L1, L11
Liverpool is offering investors handsome returns, and, in some postcodes, yields of up to 10%, which are the highest in the country.
The city centre offers the top buy to let areas:
- Liverpool’s L1 postcode currently offers a median rental value of £825 per month with properties averaging £90,000 to purchase – putting yields at 10%
- while the L7 postcode covers part of the City Centre as well as Edge Hill, Fairfield, Kensington offers many potential BTL properties with yields of 10%.
- and the L11 postcode which covers Croxteth and Norris Green, situated around 5 minutes from the centre, has average property prices of £90,000 and monthly rent of around £594 putting yields at 8%.
Liverpool also has a thriving student scene with the University of Liverpool, Liverpool John Moores University, Liverpool Hope University, and Edge Hill University all in the city. Buying a rental property in proximity to campuses is another way to potentially achieve lucrative rents – particularly if renting to more than one tenant in an HMO.
Overall, Liverpool remains a city to move on for many property investors. Home to some of the UK’s most ambitious infrastructure investment projects which are creating jobs and generally boosting the city’s appeal, house prices are expected to rise steadily over the coming years in line with the city’s growing attractiveness.
Best Buy-to-Let areas in Bradford – BD1
Away from the North’s biggest cities, Bradford offers:
- property price growth potential,
- relatively cheap property,
- high tenant demand
- and strong yields.
In the BD1 postcode in Bradford’s town centre, the average property asking price stands at just £57,000 and yields sit at around 10%. The city centre is a popular area for those commuting to nearby cities like Leeds and as one of the fastest-growing cities in the UK, Bradford is tipped to see property price increases of 28% in the next 4 years.
A new, luxury development not to be missed is The Printworks, located in a prestigious neighbourhood in close proximity to the city centre, offering properties starting at £120,000 and potential yields of 8%.
Best Buy-to-Let areas in Leeds – LS4, LS2
By investing in property in Leeds, investors can expect:
- robust property growth
- and rising rents.
The LS2 postcode offers median property prices of £186,190 and monthly rents of £825, resulting in yields of 7.92%.
The LS4 postcode, Burley, is also one to watch with average property prices of £208,833 and yields of 8.6%. At the same time rents are tipped to rise 18.8% by 2024, making the city even more appealing.
Leeds is one of the most popular UK cities for national and international students, with the University of Leeds being a highly respected and sought-after institution. The Southbank District is one of the city’s most up-and-coming, set to unlock the economic potential of the historic area to double the size of the city centre.
One of our properties, Sky Gardens, offers pre-launch prices of up to 15% discount and low deposits of just 20% and is located in one of the best buy-to-let investment areas in the city.
Best Buy-to-Let areas in Nottingham – NG1
The NG1 postcode in the city centre of Nottingham offers particularly attractive rental yields for one and two-bedroom properties at 7.24% and 6.13%, respectively.
The average rent in NG1 is around £1,296 per calendar month while the average rent for a one and two-bedroom property stands at £875 and £1,150, respectively.
In recent years, asking rents in the city centre have grown by close to 7% and landlords have benefitted from an undersupplied rental market. In the city centre, The Wells Boutique development offers yields expected to reach 7.5%.
Best Buy-to-Let areas in Manchester – M14
The hugely popular Northern city of Manchester is one of the best areas for buy-to-let in the UK.
M14 postcode of Fallowfield is a popular student area and rental yields of 7.6% are quite common thanks to relatively low property prices and high rental demand.
Manchester is home to one of the largest rental markets in the UK, with 31% of the city’s population privately renting, alongside some of the lowest vacancy rates. Average rent in Manchester currently sits at around £1,504 per calendar month, and with a thriving student scene, a room in a property can go for £542 per month.
The average value of property in Manchester through 2024 is set to grow by 17.1% and our new Manchester Waters property is set to offer landlords rental yields predicted to reach 6%.
When it comes to the best buy-to-let areas in the UK, the key for investors is to monitor changing tenant demands and ensure their chosen property will deliver decent rental yields that can cover the monthly costs of the property.
Right now, areas in the North of England are offering some of the highest yields in the country as well as rising property values that can result in significant capital gains when.
To find out more about the buy-to-let property investment in the UK, talk to our experts.