A number of locations across the West Midlands, the north west, the north east and Yorkshire have been flagged up as places where landlords can most quickly pay off their properties through rent.
Assessing a property’s potential rental yield can be a great strategy for landlords to assess an investment option, particularly during times of slower house price growth. As rents across many parts of the country continue to hold strong and increase, many landlords are reporting stronger yields at the moment.
In new research published by Molo Finance, 10 top locations have been identified where landlords can make enough accumulated rent to pay off the value of a property – discounting any mortgage payments or other costs involved – through rental income.
Interestingly, the thing that these areas have in common is their position in the UK, with the top 10 all being found in the north, Midlands or Wales. Meanwhile, the bottom 10 locations, where landlords take the longest time to achieve their purchase price through rent, were mainly in the south.
This is despite the fact that London and the south east in particular tend to see much higher rents than elsewhere, as this is outweighed by the significantly higher purchase price involved. This means landlords tend to make much lower rental yields in these locations.
The top 10 and the bottom 10
Landlords focusing on rental yields tend to hone in on areas where property prices are more affordable, and where tenant demand and rental prices are particularly strong. Over a prolonged period, house prices in most areas can expect to increase, too, which is why property investment tends to be viewed as a long-term strategy.
Molo Finance has analysed average house prices, average monthly rents and total purchase price (including stamp duty and conveyancing costs, calculated on data used by applying for a buy-to-let mortgage) to calculate the average number of years it takes for landlords to use rental income to pay off a property.
- Wales: Central Valleys – 12.56 years
- North East: Hartlepool and Stockton-on-Tees – 12.66 years
- North East: South Teesside – 13.05 years
- Wales: Swansea – 13.69 years
- North West: Lancaster and Wyre – 14.07 years
- West Midlands: Coventry – 14.17 years
- North West: East Merseyside – 14.49 years
- North East: Darlington – 14.65 years
- Yorkshire and the Humber: Barnsley, Doncaster and Rotherham -14.78 years
- Wales: Gwent Valleys – 14.91 years
As the results show, landlords investing in property in the top 10 places could pay off the purchase price of their property in less than 15 years.
Meanwhile, the locations where landlords will take the longest to achieve their purchase price through rental payments were as follows:
- London: Camden and City of London – 27.96
- East of England: West Essex – 27.47
- South West: Dorset – 27.26
- London: Bromley – 27.13
- East of England: North and West Norfolk – 27.09
- South West: Torbay – 27.06
- Yorkshire and the Humber: North Yorkshire CC – 27.04
- South West: Cornwall and Isles of Scilly – 26.57
- London: Kensington & Chelsea and Hammersmith & Fulham – 26.47
- London: Harrow and Hillingdon – 26.09
Ways landlords can boost property appeal
There is currently an ongoing demand and supply imbalance in the UK rental market in many parts of the country, which means a growing number of landlords are reporting being inundated with interest when they list their properties for rent.
This level of competition is pushing up rental prices in many areas. However, it is still crucial for landlords to consider how they can maximise their properties to appeal to a wider range of high quality tenant, in order to achieve the best possible yields.
Mark Michaelides, vice president of Strategy at Molo, says: “Landlords looking for additional ways to maximise rental income and earn back their money more quickly may consider home improvements, such as a new bathroom, kitchen or extension, which can increase both the rental potential and overall value.
“Making your buy-to-let more energy efficient is another way to boost rental income, as it may make the property more desirable to tenants due to lower energy bills.”
