6^th March 2020

What makes a great buy-to-let property?

Research by a lettings management platform has concluded that a two-bedroom property is likely to deliver the best yield for UK buy-to-let investors. They assessed one-, two-, three- and four-bed properties and analysed the average purchase price and potential rental yield for each.

Their research indicated that two-bedroom properties generate an average yield of 4.8%, placing them above one beds (4.1%), three beds (4.5%) and four beds (3.6%). Yields for two beds peaked at 5.5% in the North East, followed by the North West (5.3%) and Yorkshire (5.2%). London returned a lower than average yield, coming in at 4.5%.

Potential yield is, however, only one way of evaluating the best buy-to-let property to purchase. Limiting yourself to a two-bedroom house might mean that you end up purchasing two properties, instead of a single four bed. That gives double the running costs for a relatively marginal gain in yield, so it can be advisable to go larger and keep a lid on your expenses.

Regional variations are also key here, as the rental population is unlikely to be consistent in different locations. In an area such as London or Cambridge, for example, professional couples will usually be looking for one or two bed properties. Smaller towns and villages may be more appealing for larger families which then brings properties with four or more bedrooms into play.

Many buy-to-let investors are in the market for the longer term, but it’s also important to consider the potential for both capital growth and the ease with which you will be able to sell the property on in the future. Buying in a growing location that is undergoing regeneration or attracting new businesses can be a profitable strategy, while current property hotspots can lead to inflated prices and lower returns.

As Andrew Ward, owner of Award Property Management, explains, the buy-to-let market can be something of a minefield so it can be beneficial to get specialist advice. ‘As letting agents in Cambridge, we’re often approached by would-be landlords for advice on the best properties to invest in,’ comments Andrew. ‘With our background, experience and local knowledge we’re very well placed to help new investors to identify and purchase the right property to meet their objectives. In reality, there are lots of factors to take into consideration, including the asking price, the rental yield, the ongoing maintenance costs, the tenant demographic and the future capital growth. Over the years we’ve helped many of our landlords identify and purchase the most appropriate properties, and we’re always looking to help new investors make the right decisions.’

Award Property Management are letting agents in Cambridge, so if you’re considering entering the buy-to-let market, why not get in touch? We’d love to hear from you.