Research conducted by TotallyMoney suggests university cities offer the highest return on buy-to-let investments, with Liverpool postcodes L7 and L6 coming out on top, with average rental yields of 11.79% and 11.59% respectively. The postcodes are close to two of Liverpool’s three universities, making it a potential hotspot for buy-to-let investors.
Middlesbrough’s TS1 town centre postcode gains the third place, with an average rental yield of 10.94%. The area also has an average asking house price of just over £65,000, making it one of the most affordable investment areas.
Edinburgh postcode EH8 comes fourth, with average yields of 10.62%. With a student population of 100,000, Manchester also performs well. M14 has average rental yields of 10.08% and is home to Manchester Metropolitan University.
Not the best capital returns
London was one of the worst areas across Britain for buy-to-let yields, with north London faring particularly badly. Of all the London postcodes surveyed, five north London postcodes rank in the bottom 10, with rental yields as low as 1.5%.
The research suggests that investors should look to east London for the best returns. Indeed, East Ham, Plaistow, Manor Park, Chingford, Stratford and Poplar rank in the top 10 London postcodes for rental profits, yielding 4.81%, 4.52%, 4.3%, 4.11%, 4.1%, and 3.95% respectively.
Outside of London, the worst performing area was Bournemouth’s BH14, which has average rental yields of 1.68%. Crewe’s CW12 comes next, with 1.74%.
All postcodes in the 25 lowest yielding areas have average house prices of more than £300,000, which suggests more affordable house prices generate better rental yields.
TotallyMoney’s head of brand and content, Joe Gardiner, said: “With students flocking to university cities year after year and looking for a place to live, it’s no surprise the student market is a dependable one for landlords. Since so many students are looking for accommodation, landlords may use this as an opportunity to drum up competition between them.
“But, due to the tenant fee ban, changes in mortgage tax relief, and tighter buy-to-let lending criteria, rental profits are now being squeezed more than ever. To maximise their returns, landlords need to be savvier — and that’s where our map and mortgage comparison tool can help,” he added.