Where are the best places to invest in the UK?
Despite London being the epicentre of the UK property market, rental returns on buy-to-let are biggest in towns and cities like Manchester, Southampton and Nottingham – where one in four homes are now privately rented.
Many buy-to-let landlords are looking far beyond London and identifying areas where yields are almost three times as high as in the capital. Cities offering the greatest yields include Manchester, Southampton, Blackpool, Nottingham and Hull.
The latest data on buy-to-let returns, from lender HSBC, also shows the proportion of property in each area already owned by landlords. And in many of the top-yielding areas private landlords already own one in four properties, or more.
Southampton, with rental yields of 8.73%, currently tops the list for rental returns. Manchester, Nottingham, Blackpool and Hull complete the top five locations with the best rental yield at 7.98%, 7.67%, 7.63pc and 7.47% respectively.
These areas also offer the characteristics that make for excellent buy-to-let investment because of the relatively low house prices, coupled with strong demand for rental property from large student and young professional populations.
London is often seen as the haven of property investment with many believing the streets are paved with gold. However, while the highest rents in the country are an attractive draw for landlords, high house prices in the capital squeeze yields and limit the returns available. As a result, returns can often be far more attractive in other areas, so it certainly pays for landlords to do their research.
So if you decide to invest in buy-to-let property in a regional centre like Manchester, the big question is what is the best way of managing this?
If the property investment is to provide an extra income or a pension, it is best to use an agent. But if you want to be a full time investor, and have the time to do so, it’s best to go it alone. Whatever you do, make sure you carry out thorough research, before making any decisions on how you will manage your investment.
The biggest challenge for any landlord is finding tenants. It is important to secure the right tenants to ensure your property is cared for; the rent is paid on time; and you prevent void periods. Deciding where to advertise your property; screening tenants; sorting the tenancy agreement; and organising the inventory can be time consuming. And the longer it takes to find tenants, the less revenue you will have.
Agents’ fees for a yearly management charge will probably equate to two months’ rent. A good agent will have a waiting list of potential tenants ready to move in as soon as the property is vacant, almost paying for their service immediately.
Agents will charge between 10%-15% to manage your property portfolio. But in the case of student lets, it is usually only 1%-1.5% of the total yield, still leaving a very healthy 9-10% return on investment each year.
If you have an agent looking after your property, all you have to do is check your bank account to make sure your investment yield has paid. You won’t have to worry about obtaining the correct licenses and keeping them up to date; paying utilities; organising repairs; resolving tenant complaints; chasing rent arrears; and providing the annual gas, electricity and PAT certificates. Some local council require you to get HMO selective licences and if you don’t have this you can be liable for a fine up to £20,000.
Another important consideration is that if you want to purchase the right investment property, regardless of its location in relation to where you are based, you can do this as an ‘armchair investor’. You can take advantage of some of the best yields across the UK, for example student accommodation in the North West, with the help of the right property investment firm.
The secret to a successful ‘armchair’ investment is to work with the right partners. It is important to buy from a developer with a proven track record; use a letting agent that specialises in the rental sector you are looking to be in e.g. student, residential, DSS, commercial or retail. Each of these is a specialist field and if not undertaken by an experienced agent, can lead to the failure of a potentially good investment.
*Mish Liyanage is managing director of The Mistoria Group
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