Which property gives you the best yield?

loll_l

I'm looking to put down around a 20-25k deposit on a property to rent out.... I'm thinking along the lines of a 25 to 35 year mortgage, the property can be anywhere in the UK, and I'm looking for the best yield possible (highest rent to lowest mortgage payments).

I could do with some advice on which way to go. Some suggestions I have been given so far are:
- Buy a student house somewhere like Hull with as many bedrooms as you can
- Buy on the outskirts of London as the CBD is expanding all the time and the value of the property will shoot up
- Buy a flat by the river in Leeds as these are sought after and I will have no problem renting it out
- Buy a house in Sheffield City Centre as property there has a good yield
- Buy a property which can be converted into smaller flats

Does anyone have any suggestions for the best way to go? I suppose my main concern is not having the property occupied so I obviously don’t want to buy anywhere where the demand to rent is low.

sparky130a

I'm sorry but you sound woefully naive. Why property? Why not another type of investment?

Do you even have any idea what being a LL entails?

anselld

Your suggestions are a mixture of yield and capital gain considerations.

Normally the two do not mix. i.e. High yield will be a cheap HMO up north with less chance of capital gain. Whereas an up-and-coming area down south would be low yield, but higher gain. (historically at least)

austonic

You can get a lot of fantastic advice on this forum, but I do hope that this is not the only research you are doing.

More important I would say if this is your first time as a landlord is to buy a property in an area you know and understand the market for, and where you can manage the property (or at very last, keep a close eye on yourself). If you buy remotely in a place you do not know, not only might you make some major mistakes, but you might also end up paying over the odds in fees to manage the property and for trade services to do work on the property (whereas on your home territory you would be able to establish a decent network of tradespeople to do stuff that you can't do yourself).

Are you intending to buy something ready-to-rent or something that needs doing up first? Obviously, there is a premium on the first.

Have your worked through some decent costs models? You are aware that stamp duty is higher (3% higher) when you buy a second property? Mortgages tend to be higher. Insurance is higher. More checks and certifications are required. Etc.

AnotherJoe

Why arent you considering investing £25k for 25 years instead?

And dont misunderstand. I'm not suggesting thats what you should do.
I'm asking why you arent considering that as an alternative to being a landlord.

loll_l

sparky130a wrote: »

I'm sorry but you sound woefully naive. Why property? Why not another type of investment?

Do you even have any idea what being a LL entails?

I am already renting out a separate property so yes. This other property does not have a good yield at all (rent and mortgage payments are both very similar) and if I had my time again I would have bought somewhere/something different.... hence me coming on here asking for advice.... I do not want to make the same mistake again.

With regards to the "why property" question.... I have some savings but have no pension so I'm looking to invest in property to secure my future.

Pixie5740

How would you manage a property far from where you live? HMO such as student lets usually offer better rental yields that renting to a family/couple/single person but require more management. Also the higher the yield the higher the risk meaning you're buying cheap properties at the bottom end of the housing spectrum but then your business model is at the mercy of government housing benefit policy. A while ago there was a poster who had 20+ properties in a really cheap area but when changes to HB were brought in he was up !!!! creek without a paddle.

sparky130a raises a good question, why property, why not some other investment vehicle or a range of investment vehicles. Don't put all your eggs in one basket.

Will the changes to mortgage interest relief impact your bottom line? Is BTL still attractive after paying out the additional 3% SDLT? How long will it take you to recover that additional SDLT?

If after researching the different types of BTL properties and other investments read G_M's guide for New Landlords to help understand what being a landlord entails.

Pixie5740

loll_l wrote: »

With regards to the "why property" question.... I have some savings but have no pension so I'm looking to invest in property to secure my future.

Why don't you have a pension? Are you employed because they should offer a workplace pension which is free money and much more tax efficient than BTL.

loll_l

AnotherJoe wrote: »

Why arent you considering investing £25k for 25 years instead?

And dont misunderstand. I'm not suggesting thats what you should do.
I'm asking why you arent considering that as an alternative to being a landlord.

What kind of alternative are you talking about? I have a someone managing my other buy to let for me and I find property to be a hassle free investment (providing nothing goes wrong!)…. I already run a business so do not have time to invest in anything “hands on” unfortunately.

tom9980

loll_l wrote: »

With regards to the "why property" question.... I have some savings but have no pension so I'm looking to invest in property to secure my future.

A pension has significant tax advantages over BTL and with the Government seemingly happy to increase the tax burdens on hated landlords you are putting your eggs in one basket is a very risky strategy when you will absolutely need to rely on this income in retirement.

The fact you haven't learnt you lesson from the first mistake is worrying and i say this as a Landlord.

loll_l

austonsmaydrydr wrote: »

You can get a lot of fantastic advice on this forum, but I do hope that this is not the only research you are doing.

More important I would say if this is your first time as a landlord is to buy a property in an area you know and understand the market for, and where you can manage the property (or at very last, keep a close eye on yourself). If you buy remotely in a place you do not know, not only might you make some major mistakes, but you might also end up paying over the odds in fees to manage the property and for trade services to do work on the property (whereas on your home territory you would be able to establish a decent network of tradespeople to do stuff that you can't do yourself).

Are you intending to buy something ready-to-rent or something that needs doing up first? Obviously, there is a premium on the first.

Have your worked through some decent costs models? You are aware that stamp duty is higher (3% higher) when you buy a second property? Mortgages tend to be higher. Insurance is higher. More checks and certifications are required. Etc.

Ideally I'm looking for somewhere ready to rent yes... so I guess that rules out buying a big house and converting it into flats.

There will be a managing agent looking after the tenant(s) for me as I run my own business (self employed) and don’t have much spare time