Where does property ‘buy itself back’ through rent the quickest?
Buy-to-let is a long-term investment, often taking landlords many years to earn back the money spent on purchasing the property. But with landlord profits currently at their lowest level in 16 years, according to new data from the National Residential Landlords Association, many landlords will be looking for ways to maximise their income and get their money back more quickly.
With that in mind, here at Molo, we wanted to find out which areas across England and Wales offer landlords the chance to make back their money in the shortest amount of time – and which take the longest.
In our latest research, we’ve used internal data to reveal how many years it would take for properties in different areas of England and Wales to buy themselves back through rent payments. Our analysis found that property in the top locations will pay for itself in a little over 12 years, whereas it can take over twice as long in other areas.
Top 10 locations where property buys itself back most quickly
Our research revealed that Wales is the number one location for property to buy itself back the quickest. With an average purchase price in the Central Valleys of £105,035 (which is among the lowest in the country) and an average monthly rent of £697, it takes around 12.56 years for landlords to pay off the value of their property — which is over twice as fast as some other areas of England and Wales.
The country also sees Swansea (under 14 years) and Gwent Valley (under 15 years) placed inside the top 10 locations to see the quickest return on your investment.
The North East is the top location in England for landlords to invest, with properties in Hartlepool and Stockton-on-Tees, South Teesside, and Darlington taking 12.66, 13.05 and 14.65 years to earn back their investments, respectively.
The average purchase price in Hartlepool and Stockton-on-Tees is just under £90,000; however, average rental income is also lower at £592, meaning it takes just 12.66 years for property to buy itself here.
Outside of Wales and the North East of England, Lancaster and Wyre and East Merseyside, both found in the North West of England, sit 5th and 7th with regards to the locations where properties that are fully rented out, pay for themself the quickest.
Rank | Region | Location | Avg monthly rent | Avg property value | Purchase price [1] | Years [2] |
1 | Wales | Central Valleys | £697 | £100,786 | £105,035 | 12.56 |
2 | North East | Hartlepool and Stockton-on-Tees | £592 | £85,774 | £89,889 | 12.66 |
3 | North East | South Teesside | £646 | £96,500 | £101,214 | 13.05 |
4 | Wales | Swansea | £948 | £150,297 | £155,756 | 13.69 |
5 | North West | Lancaster and Wyre | £576 | £93,000 | £97,214 | 14.07 |
6 | West Midlands | Coventry | £1,096 | £179,347 | £186,314 | 14.17 |
7 | North West | East Merseyside | £642 | £106,850 | £111,590 | 14.49 |
8 | North East | Darlington | £506 | £85,370 | £88,980 | 14.65 |
9 | Yorkshire and the Humber | Barnsley, Doncaster and Rotherham | £668 | £113,644 | £118,440 | 14.78 |
10 | Wales | Gwent Valleys | £635 | £107,500 | £113,665 | 14.91 |
[1] Purchase price, based on Molo’s internal data, combines stamp duty and conveyancing cost when applying for a buy to let mortgage.
[2] Number of years it takes to pay off final property value.
Locations with highest rental yield
- Explore the map
- Calculate expected yield based on your property value
- Calculate the avg. monthly rent and compare results with any location on the map
Locations where it takes the longest for property to buy itself back
Landlords hoping to make their money back quickly should avoid London, with multiple areas ranking among the bottom 10. As property here takes between 25 and 27 years to buy itself back, those who do purchase a buy-to-let property in the city should be aware it is a capital investment.
The boroughs Camden and City of London find themselves at the bottom of the locations analysed, with a high average purchase price of £760,888 and average monthly rent of £2,268, meaning it takes 27.96 years on average for property to buy itself here. Although the capital is an attractive location for renters and promises a steady stream of tenants, the low gross rental yield of 3.58% found in these boroughs (one-third less than the national average) could make it difficult to earn a profit on a buy-to-let property.
Following comes West Essex. Landlords in this area can expect to pay off property value in an average of 27.47 years, considering the average purchase price of £593,311 and monthly rental income of £1,800. This is followed by Dorset in the South West (27.26 years) and Bromley in London (27.13 years).
Rank | Region | Location | Avg monthly rent | Avg property value | Purchase price [1] | Years [2] |
1 | London | Camden and City of London | £2,268 | £672,104 | £760,888 | 27.96 |
2 | East of England | West Essex | £1,800 | £548,000 | £593,311 | 27.47 |
3 | South West | Dorset | £850.00 | £270,000.00 | £278,100.00 | 27.26 |
4 | London | Bromley | £1,606 | £483,636 | £522,869 | 27.13 |
5 | East of England | North and West Norfolk | £1,000 | £315,000 | £325,044 | 27.09 |
6 | South West | Torbay | £1,395 | £439,000 | £453,068 | 27.06 |
7 | Yorkshire and the Humber | North Yorkshire CC | £778.51 | £244,000.00 | £252,655.15 | 27.04 |
8 | South West | Cornwall and Isles of Scilly | £1,120.00 | £345,500.00 | £357,108.73 | 26.57 |
9 | London | Kensington & Chelsea and Hammersmith & Fulham | £3,104.96 | £871,635.90 | £986,075.69 | 26.47 |
10 | London | Harrow and Hillingdon | £1,625 | £492,711 | £508,945 | 26.09 |
[1] Purchase price, based on Molo’s internal data, combines stamp duty and conveyancing cost when applying for a buy to let mortgage.
[2] Number of years it takes to pay off final property value.
Speaking about how landlords can pay off their property value more quickly,
Vice President of Strategy at Molo, Mark Michaelides says: “Landlords looking for additional ways to maximise rental income and earn back their money more quickly may consider home improvements, such as a new bathroom, kitchen or extension, which can increase both the rental potential and overall value. Making your buy-to-let more energy efficient is another way to boost rental income, as it may make the property more desirable to tenants due to lower energy bills.”
Whether you’re a first-time landlord or more experienced, check out our rental yield calculator for a fast and easy way to discover the viability of your current or future property investments.
The methodology behind the numbers
Molo carried out research on every area of England to see where the top and bottom buy-to-let locations exist. This is based on metrics that include:
How is the gross rental yield calculated?
Gross yield was calculated by taking the annual rental income and dividing it by the sum of the average property price, plus the average conveyancing fee and stamp duty based on the property details provided. The Gross Yield displayed on the map assumes individuals have applied for a mortgage.
How is the net rental yield calculated?
Net rental income was calculated by taking the annual rental income and minusing it by the sum of the associated costs. Associated costs were calculated by taking 1% of the property price.
How is the average stamp duty calculated?
Stamp duty was calculated by taking the average property value for a location according to the following:
Tax rate | Property price range |
3% | Up to £500,000 |
8% | £500,001 to £925,000 |
13% | £925,001 to £1.5 million |
15% | Above £1.5 million |
Locations with highest rental yield
- Explore the map
- Calculate expected yield based on your property value
- Calculate the avg. monthly rent and compare results with any location on the map
