When it comes to finding the best areas for offering the best buy to let yields, property investors should be looking outside London, according to a new study.
Property consultancy Move With Us has revealed that none of the top 10 best buy-to-let hotspots in the England and Wales are in the capital.
Instead, UK’s second largest city Birmingham has landed three slots at the top of the table with the B7 postcode giving the best return on an investment in England and Wales.
The consultancy says that a two bedroom home will generally have a gross annual buy to let yield of 10.7%.
The news is likely to come as a surprise for many property investors, particularly those who invest in London and was seen astonishing returns on their investment as property prices have remained stable and have increased in recent months.
However the new study came up with a table by looking at two bedroom homes which were for sale or rent in England and Wales to find their results.
Closely following the B7 post code in the top 10 are the B35 and B18 postcodes with gross buy to let yields of 9.2% and 8.7% respectively.
The analysis by the consultancy found that high buy to let yields for such properties tend to be found in densely populated areas which attract professionals who are keen to live near to their work and close to good amenities such as shops and nightlife.
Property firm Home.co.uk helped to compile the date and the site’s director Doug Shephard said the study would be invaluable for investors looking to find the highest potential buy to let yields in England and Wales.
Property investors should be open-minded as to where their money would be put to best use which is likely not to be in their immediate area, he added.
Mr Shephard explained: “Investors looking for the ultimate combination of in-demand property, lower capital investment and higher rental prices will find a highly localised approach will deliver good yields and a few avoids to maximise potential returns.”
Buy-to-let investors should be looking for higher yields on their investment and the general rule of thumb is that the rate of return generally increases as the property value decreases.
To illustrate this, a two bed house worth £100,000 with an annual rent of £6,500 has an annual buy to let yield of 6.5%
In contrast, a property worth £200,000 would see its annual yield drop to 3.25%.
This helps explain why yields tend to be lower on buy-to-let properties in London and the South East of England because property prices in that region are much higher than in most other regions of England and Wales.
Top 10 Yielding Postal Districts in England & Wales
Source: Move With Us