Buy-to-let hotspots: most profitable areas

Tax changes and rising mortgage rates are putting the screws on making buy-to-let seem less appealing, but a new survey suggests there is still plenty of money to be made – if you invest in the right places.

The past couple of years have been full of bad news for buy-to-let landlords. Increasing buy-to-let mortgage interest rates combined with a change to how much mortgage interest you can write off against tax has dealt a blow.

On top of that, the additional rate of Stamp Duty has also hit landlords.

But, a new survey has revealed there are still plenty of places in the UK where you can still get a decent yield on a buy-to-let investment.

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Financial site Totally Money looked at 500,000 properties across England, Scotland and Wales and found that while landlords in London may be struggling to make a decent return in Liverpool yields of almost 13% are still possible.

“Realising a decent return on buy-to-let rental property is becoming increasingly difficult. Prospective landlords need to go into property investment armed with the facts,” says Joe Gardiner, head of brand and communications at Totally Money.

“They need to be on top of their credit report, compare the market for the best buy-to-let mortgage rates and focus on property investment in areas that can give them the highest yield.”

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Top 25 buy-to-let property hotspots

The research found that students are providing many of the buy-to-let hotspots around the country with university towns such as Newcastle, Manchester, Nottingham, Sheffield, Glasgow, Cardiff and Plymouth, as well as Liverpool, all offering the best returns with average annual yields, before costs, of over 7%.

Lower house prices outside of London and the South East, combined with student demand for rental accommodation mean that all these cities have housing stock that provides a decent investment yield for landlords.

	Town	Postcode	Properties for Rent	Median Rental Value	Properties for Sale	Median Asking Price	Yield
1.	Liverpool	L7	177	£1,224	79	£116,259	12.63%
2.	Liverpool	L6	217	£959	133	£108,898	10.57%
3.	Liverpool	L15	227	£1,214	241	£141,566	10.29%
4.	Plymouth	PL4	334	1,315	271	£155,437	10.15%
5.	Cleveland	TS1	146	£541	81	£64,507	10.06%
6.	Preston	PR1	431	£1,027	586	£122,695	10.04%
7.	Dudley	DY5	53	£1,145	96	£143,527	9.57%
8.	Nottingham	NG1	79	£1,258	125	£169,521	8.91%
9.	Bradford	BD1	226	£478	82	£64,903	8.84%
10.	Kirkcaldy	KY1	105	£892	368	£124,254	8.61%
11.	Liverpool	L3	167	£1,035	716	£146,712	8.47%
12.	Newcastle	NE6	425	£826	229	£117,863	8.41%
13.	Huddersfield	HD1	127	£724	151	£104,394	8.32%
14.	Manchester	M6	130	£1,035	94	£150,550	8.25%
15.	Leeds	LS6	1,128	£1,482	43	£217,154	8.19%
16.	Sheffield	S2	238	£702	122	£104,376	8.07%
17.	Newcastle	NE1	308	£1,152	115	£172,225	8.02%
18.	Liverpool	L5	45	£574	145	£86,245	7.99%
19.	Manchester	M14	279	£1,335	78	£200,852	7.98%
20.	Sunderland	SR1	107	£539	32	£82,125	7.87%
21.	Liverpool	L8	169	£841	168	£135,323	7.45%
22.	Cardiff	CF37	128	£844	209	£136,267	7.43%
23.	Glasgow	G3	37	£1,178	30	£192,032	7.36%
24.	Aberdeen	AB11	198	£762	31	£125,125	7.30%
25.	Newcastle	NE2	555	£1,250	118	£205,479	7.30%

And where to avoid

At the other end of the scale, soaring house prices mean yields in London and the South East are the lowest in the country with landlords in parts of London managing an average annual yield of under 2%.

Here, the high cost of property means it can take landlords years to cover their costs and start making a profit.

These are the postcodes that offered the lowest yields of the 2,700 postal areas Totally Money surveyed.

	Town	Postcode	Properties for Rent	Median Rental Value	Properties for Sale	Median Asking Price	Yield
1.	Bournemouth	BH13	72	£1,714	202	£1,456,539	1.41%
2.	London	N2	230	£3,702	186	£2,994,317	1.48%
3.	Birmingham	B70	52	£633	82	£450,639	1.68%
4.	London	N6	172	£2,899	197	£1,971,822	1.76%
5.	Bournemouth	BH14	81	£1,293	229	£831,035	1.86%
6.	Slough	SL1	381	£1,071	499	£674,362	1.90%
7.	Exeter	EX8	38	£717	139	£448,774	1.91%
8.	London	NW11	498	£2,456	282	£1,523,534	1.93%
9.	Birmingham	B15	83	£963	75	£587,683	1.96%
10.	Bromley	BR7	31	£1,414	132	£854,160	1.98%
11.	Leeds	LS18	42	£512	45	£302,086	2.03%
12.	Gloucester	GL53	40	£877	55	£516,842	2.03%
13.	Harrow	HA6	129	£1,736	190	£987,810	2.10%
14.	Kingston-upon-Thames	KT20	32	£1,702	189	£967,397	2.11%
15.	Slough	SL8	35	£1,425	52	£778,236	2.19%
16.	Enfield	EN6	75	£1,304	320	£710,537	2.20%
17.	Hemel Hempstead	HP23	35	£1,092	138	£593,300	2.20%
18.	Southampton	SO41	47	£1,286	350	£695,635	2.21%
19.	Huddersfield	HD9	35	£679	222	£364,310	2.23%
20.	London	NW5	184	£2,088	179	£1,111,065	2.25%
21.	London	N10	200	£1,747	222	£923,278	2.27%
22.	Brighton	BN3	167	£1,665	313	£876,105	2.28%
23.	London	N20	90	£2,442	185	£1,284,812	2.28%
24.	London	SW8	576	£2,685	1,185	£1,403,592	2.29%
25	London	NW7	171	£1,948	309	£1,010,503	2.31%

Have you been put off buy-to-let by falling yields, or have you bought student property in a far away city so you can make a decent return? Tell us in the comments below.

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