There are many measures that property investors use to determine the best locations on which to focus, and a new study has narrowed down some of the top cities for return on investment.
The Midlands is far from middling, it seems, when it comes to making a healthy profit through property investment. It is a region that has undoubtedly taken off in recent years from a business perspective, and its cities are thriving as a result.
Whenever business opportunities, transport provision and general infrastructure in a location improve, this tends to have a knock-on effect on the area’s property market, leading to a greater return on investment for those who invest there. The likes of Birmingham, Nottingham and Coventry are all leading the way in this respect.
New research from Bonusetu.com, drawing on data from Zoopla, Rightmove and Propertypal, hones in on the cities across the UK that are proving the most promising for buyers and boosting return on investment prospects. In its report, the Midlands is a region that features heavily.
Best major city for return on investment
The study looks specifically at the return on investment that can be achieved for one-bedroom flats across all 76 cities in the UK and the Isle of Man. Smaller properties such as flats are a hugely popular home type for property investors as they are in high demand among rental tenants and come at a lower price point.
In terms of the time it takes for the average buyer to regain their deposit after purchase, Coventry was listed as the number one city in which to invest. It can take just 14.8 months to see your deposit returned – with the average deposit currently sitting at £19,875 – and rental yields can be a huge 12.2%.
The city is relatively small compared with some of the country’s major cities, though, and in this space it is Birmingham that holds the crown. Also based in the West Midlands, it came in second position overall where it takes an average of 15.6 months to make your deposit back.
Yet deposits in Birmingham are considerably higher than Coventry, at an average £29,747 for a one-bedroom flat. Rental yields are slightly stronger at an average 12.5%, providing a real boost to your return on investment alongside strengthening house prices.
Another Midlands city appearing in the top 10 list is Derby in seventh position. Here, the average deposit for a one-bedroom flat is £20,438, while the average monthly rental income is £975.
Ideal number of bedrooms
Deciding on what size property to invest in will depend a lot on your circumstances, your budget and your ideal target tenant, among other factors, so there is no ‘ideal’ number of bedrooms to go for. Your choice may also depend on how long you plan on owning the property, and where it is located.
However, Bonusetu’s study found that a one-bedroom property will return your deposit around 32.7% more quickly than a three-bedroom property, on average.
Three-bedroom homes bring in an average rental amount of £1,648 per month, and this equates to a 55-month waiting time to earn back the average 15% deposit, with yields of 3.86%. This is something to factor in when working out your ideal return on investment.
By contrast, the average one-bedroom property takes 37.6 months to earn back its deposit through rental income, based on average rents of £957.13, a 15% deposit, and typical yields of 5.75% across the UK.
A spokesperson from Bonusetu.com commented: “This research highlights the importance of evaluating current market conditions when considering investing in the housing market.
“By analysing the live market data, we can provide valuable insights for motivated property investors who are looking to maximise their return on investment in 2023.”
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