Smaller properties produce the best yields for buy-to-let investors with low budgets

Countrywide Lettings

Tuesday, April 16, 2013

One and two-bedroom properties provide the highest rental returns for investors with average yields of 6.8% and 6.4% respectively, according to data from Countrywide, the UK’s largest lettings agent.

Following high interest from investors for this information, Countrywide has published national yield, rent and arrears data based on the number of bedrooms a property has. Countrywide is the first letting agent in the country to publish such data on this scale, which is based on 50,000 properties across England, Scotland and Wales.  

Three and four plus bedroom properties are achieving an average yield of 6.2% and 5.6% respectively. The average rent for four bedrooms properties was £1,398pcm in the first quarter of 2013 whilst for one bedroom properties it was £673pcm.

Despite larger properties achieving greater rents, it is the smaller properties that have seen rents rise the most, with one and two bedroom properties seeing a 3.3% year-on year increase in rents, three bedroom properties a rise of 2.3% and four plus bedroom homes a rise of just 0.3%.

All sizes of properties have seen a fall in rental arrears in the first quarter of 2013, with three bedroom properties witnessing the greatest fall at 1.5% and one-bedroom properties the smallest decrease at 0.4%.

Table A: Movements in rents, yields and arrears data in England, Scotland and Wales.

Bedrooms

 Q1 2013 average rent (£)

 Q1 2012 average rent (£)

Rent year-on-year increase

Yield

Arrears 30 days (% rent roll £)

Arrears improvement year-on-year (% rent roll £)

1

£673

£651

3.3%

6.8%

5.5%

0.4%

2

£758

£733

3.3%

6.4%

5.4%

1.2%

3

£872

£852

2.3%

6.2%

7.0%

1.5%

4+

£1,398

£1,394

0.3%

5.6%

6.7%

1.0%

Total

£835

£815

2.4%

6.2%

5.9%

1.1%

Commenting on the analysis Nick Dunning, Commercial Director at Countrywide says: “We wanted to produce this data to show landlords and investors what sized properties are achieving in terms of rents and yields. As our data shows one and two bedroom properties are providing greater yields than larger properties for landlords, 6.8% average yields for one bedroom properties, means there are some really good opportunities for investors with relatively low budgets."

"For example, a one bedroom flat in Nottingham recently sold for £51,000 and is providing a rental yield of 6.9%.  With rents rising, arrears falling and some significantly improved buy to let mortgage products compared to those available in the last two years, the findings are very encouraging for investors who are looking to start or expand their property portfolio this year.”  

-Ends-

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