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Tuesday, October 21, 2014

The best yields for buy-to-let revealed

As a landlord have you ever wanted to be show where the best yields across the UK are for buy-to-let?

Sheffield City Centre best for yields?
The postcode S1 which for those in the know has the best yield in the UK according to the totallymoney website.  For those in the know this is not surprising.  Sheffield city centre like many provincial city centres is benefiting from a boom in rents as International students from the likes of China and the Middle East bid up the cost of renting the best quality new apartments.  The average rent is showing as £645 giving a yield of over 11% on the quoted capital value of just under £60k.  The reality is that to achieve that kind of rent a landlord would be looking at paying over £80,000 for a 2 bed apartment and that after paying the ground rent and service charge a landlord would be lucky to have £500 in their pocket each month (even less if they had a mortgage).  The figures have been distorted by the large number of ex council properties in the area that would only be suitable to LHA tenants.

International students a lucrative market
On the recent Letting Essential Course I was talking to one newbie landlord that had created her own specialist letting business by letting new builds almost solely to these types of tenants on a 12 month Assured Shorthold Tenancy Contract.

Dangers of letting to international students
The danger with international students is it's very difficult to insure against bad debts.  If they disappear off to China then how will you get your money back.  Even a guarantor agreement is not likely to be much help.  So far she has been lucky so fingers crossed.

The yield table is an interesting  tool but like all statistics a landlord needs to delve behind the headlines and understand what they really mean.

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Robert Mellors said...

Most of the properties I let are in Sheffield. I know that the S1 postcode is extremely expensive for both buying and renting, and I cannot afford to take on properties in that area. The quoted figures in this article are way out, you cannot get 2 bed flats in the S1 area for £80k, more like £130k, so if that only achieves £645 pcm then that is not such a good return on investment, especially when the ground rent and service charges are factored in. The statement about there being lots of ex-council properties in S1 is rubbish, there are a few, but they rarely come up for sale (or rent), and when they do they are equally as expensive.
There are loads of new build, very expensive flats in S1 that are stood empty as the owners have bought off-plan as long term investments, rather than to really let out. There are also loads of tiny "cluster flats", i.e. en-suite rooms for students with a communal kitchen, and these are new build flats done by registered housing associations with the aid of government grants (taxpayers money), and again loads of these are left unoccupied rather than reducing the rents to get them filled. - If taxpayers are subsidising them, then less need to get them all let. These unoccupied, and heavily subsidised, flats distort the figures.

The Editor said...

Hi Robert, thanks for your insightful comments. I clearly don't know the City centre market as well as I thought. I live out in Totley.

Mick Roberts said...

What u doing on here Rob? We're everywhere aren't we ha ha.