If you’re looking to invest in property to let, Liverpool is where you should be looking. New research has found that Liverpool is the UK’s number one hotspot for buying to let, with rental yields at 8% with mortgage costs taken into account. The costs of property and mortgages have the biggest influence on yields, making the low average house prices in Liverpool ideal for the rental market, with strong rents.
The tax changes, including higher rates of stamp duty and restricted mortgage interest tax relief, make it necessary to maximise rental yields. The costs associated with owning a rental property need to be off-set by higher rents but not to the point of not being able to get tenants to rent from you. With Liverpool being strong in rents and low in the cost of houses, it’s ideal for any investor. The low mortgage rates help so be sure to lock in at a good rate.
Misinterpretation is common when looking at the housing market across the UK. While a landlord can expect to get high rental income from properties in London, for example, the cost of purchasing a house to let can be out of reach. More and more people are moving away from the London area and are willing to commute, if necessary, to avoid the high rent.
According to the research, which calculated rental yields in the 50 UK towns and cities with the highest proportion of private rental housing stock, six out of 10 of the areas with the lowest house prices are also in the top 10 list for best rental yields. Yet none of the locations with the top ten highest average rents are buy to let hotspots. Situated almost exclusively in London, these locations bring up to £5,000 in monthly rents but come associated with hefty purchase costs.
Shaun Church, director of Privat Finance said that “Investors should look for areas with strong rental demand. Larger cities and university towns generally have better performing rental markets. This will help to avoid lengthy void periods that can damage landlords’ profitability. They may also want to stay away from areas with very high house prices. Although these locations can provide high rental income, a large initial investment can prevent investors from achieving good returns.”
If you have the cash to buy a property to let in London, averaging around £1.4 million, and you’re willing to wait for your investment to gain capital, then that’s the route you should take. For most, though, the ability to start making money from the start while investing a lot less in a an area like Liverpool, is your best bet.