Its research showed that outer London currently achieves an average rental yield of 7.32%, followed by the South West at 7.07% and the North West at 6.97%.
Paragon said that the West Midlands, encompassing Birmingham, Wolverhampton, Coventry, Stoke and Worcester, has performed so strongly due to the redevelopment of Birmingham city centre, strong job creation and a solid manufacturing base.
The survey of nearly 600 landlords, conducted for Paragon by BDRC Continental, showed that students remain the highest yielding tenant type, with an average yield of 7.62%.
Families with children bring in yields of 6.57%, followed by migrant workers at 6.53%.
Houses in Multiple Occupation (HMOs) are the highest yielding property type, returning 7.56%, followed by bungalows at 6.99% and flats where the landlord owns the whole block at 6.95%.
Nigel Terrington, chief executive of Paragon, said: “The yield a rental property generates is a hugely important part of a landlord’s business plan, as they give a good indication of how well the property is performing and the level of income it is providing.
“It is interesting to see that the West Midlands is generating the highest yield.
“The area itself is a hub for manufacturing, has a strong professional services sector, is home to several large universities and is undergoing significant redevelopment, so therefore attracts a healthy mix of tenant types, including students, young professionals, manual workers and economic migrants. All of which contributes to a healthy, regional private rental sector.”