Location is one of the biggest factors influencing rental yields in the UK. 

Properties in high-demand areas, particularly those close to public transport, schools and key amenities, often have stronger rental income because they appeal to a wider pool of tenants. 

However, if demand in a particular area is lower, rental yields may be considerably lower, so it’s important to consider local demand and what the surrounding area offers before investing.

The type of property can also make a difference. 

Flats often appeal to investors as they can offer strong rental yields due to their relative affordability and consistent demand. 

However, demand varies by location and tenant needs. For example, in desirable school catchment areas, houses are often in higher demand than flats, while HMOs (houses in multiple occupation) can deliver some of the highest rental yields of all property types. 

Houses in London may also offer stronger capital growth. It is therefore important for investors to think carefully about the type of property they are buying and the returns it is likely to deliver.

Market conditions also play an important role. Rental yields are often influenced by the balance between supply and demand. 

When demand for rental properties is high and supply is limited, yields may rise. However, yields can also come under pressure.

How investors find genuine investment opportunities

So how can investors know what a genuine opportunity looks like? Simon breaks down below his top tips on what to look for and how: 

1. Understand tenant demand in the area you are looking in 

First, investors should understand tenant demand in the area where they are considering buying and how it aligns with their long-term goals.

Knowing your market is crucial. For example, if there are universities nearby, there will likely be consistent demand from students looking for furnished rental properties. 

This can help investors identify areas where occupancy is likely to remain high throughout the year, supporting stronger rental yields.

Understanding who your tenants are likely to be, and what they are looking for, can help investors maximise yields, while also reducing the risk of longer vacancy periods.

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2. Consider average yields long term for the type of property

As a general rule of thumb, investors should consider the long-term average yields for the type of property in the area they are considering.

Looking at how similar properties have performed, such as student lets compared with family homes, can help investors determine whether a property is likely to deliver sustainable rental yields rather than benefiting from short-term demand driven by current market conditions.

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3. Look for affordable postcodes

It is also important to consider the postcode and wider area where you plan to invest, rather than focusing only on current rental yield figures.

London, for example, was once seen as a particularly attractive investment area due to its high property values. 

However, in recent years, property prices have become so unaffordable that rental yields have declined significantly.

Meanwhile, cities such as Manchester and Liverpool are seeing increasing investment in housing, transport, schools, and universities. These areas are often more affordable, which can support stronger tenant demand and higher long-term occupancy rates.

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4. Think long-term when it comes to financial goals 

Investors should also consider what a “good” rental yield means for their own financial goals.

For some, prioritising areas where high yields are almost guaranteed is important because it provides strong cash flow from the outset. 

For others, lower yields may be acceptable if rental income covers running costs and mortgage payments while the property benefits from long-term capital growth.

Understanding your long-term goals can help investors make more informed decisions about when and where to invest, rather than being influenced by short-term opportunities.

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5. Make sure you understand current market trends in the area you’re buying 

Finally, it is essential to understand current market trends and how they are affecting rental yields in specific areas. 

What was considered a strong yield a few years ago may not look the same in today’s market.

National averages can also be misleading. Investors should therefore look at historical and hyper-local data for the specific area they are considering. 

This will help them identify genuine opportunities rather than relying on headlines or overly broad statistics.

Simon Cairnes is a property expert at BuyAssociation