There are many factors that go into choosing a buy-to-let location, but one landlords often circle back to is the gross yield. Molo’s internal data shows the average rental yield for England and Wales stands at 4.98%, meaning a good rental yield will generally sit slightly above this. Now, it’s not quite as simple as ‘good yield equals good investment’, as other factors – like buy-to-let mortgages, maintenance and void periods – come into play.
The gross yield of a location is a leading factor in the decision of where to purchase a buy-to-let property. That leaves the question, ‘where might investors decide to cast their nets for good returns, and which areas possibly don’t live up to expectations?’
According to our internal data, these are some of the top locations along with areas that may be considered less favourable for buy-to-let investment. Read on to find out which areas made the list.
Finding buy-to-let locations with good yields
Investing in England’s buy-to-let market is as much about location as it is the numbers. In fact, the postcode usually informs the numbers, with cities and rural areas alike across England offering strong rental yields. The variance across the nation is clear to see.
As well as the yield, landlords also need to consider other factors, such as a buy-to-let mortgage. More than 50% of buy-to-let properties in the UK have a mortgage, and it’s the most significant cost to consider for landlords who are borrowing to invest.
Beyond that, the cost of stamp duty, ongoing property maintenance, void periods (when a rental property sits empty) and the type of tenants all play a role when it comes to choosing a buy-to-let property.
A snapshot of England's buy-to-let locations with the highest yields
Rank | Location | Average monthly rent | Average purchase price [1] | Associated costs | Gross rental yield | Net rental yield |
01 | Hartlepool and Stockton-on-Tees | £591.70 | £89,888.56 | £857.74 | 7.90% | 6.94% |
02 | South teesside | £646.24 | £101,214.36 | £965.00 | 7.66% |
6.71% |
03 | Lancaster | £575.80 | £97,214.14 | £930.00 | 7.11% | 6.15% |
04 | Coventry | £1,095.97 | £186,314.34 | £1,793.47 | 7.06% | 6.10% |
05 | East Merseyside | £641.73 | £111,589.47 | £1,068.50 | 6.90% | 5.94% |
06 | Darlington | £506.31 | £88,979.90 | £853.70 | 6.83% | 5.87% |
07 | Barnsley, Doncaster and Rotherham | £667.98 | £118,440.07 | £1,136.44 | 6.77% | 5.81% |
08 | Durham | £544.45 | £97,927.28 | £940.55 | 6.67% | 5.71% |
09 | East Lancashire | £569.10 | £102,664.30 | £986.38 | 6.65% | 5.69% |
10 | Plymouth | £633.37 | £115,178.43 | £1,103.33 | 6.60% | 5.64% |
[1] Purchase price, based on Molo’s internal data, combines stamp duty and conveyancing cost when applying for a buy to let mortgage.
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
Where are the top locations for buy-to-let?
Hartlepool and Stockton-on-Tees
Our data reveals that Hartlepool and Stockton-on-Tees present what could be an appealing proposition for buy-to-let investors thanks to a high average rental yield of 7.90% and average property prices below £90k. Average rent is just over £590, and landlords can expect to pay just over £850 a year in associated costs, meaning the running costs for a rented property are some of the lowest in the country.
South Teesside
South Teesside has the second highest yields in England with 7.66% and an average property price slightly over £100k. The University of Teesside has more than 22,000 students, making it an interesting options for landlords who want to make the most of the student rental market.
Lancaster
Lancaster has the third highest yields in England with an average of 7.11%. The average property price here is lower than £100k, and renters tend to find the area attractive due to its position as a commuter town that’s only an hour away from Manchester.
Coventry
Located in the Midlands, Coventry has seen a surge of regeneration over the last few years, which has led to an increase in new homes. It manages yields above 7%, with an average rental asking price of £1,000 per month. The city centre has been a point of focus, with £450m invested to create more homes, a cinema, hotel and shopping space.
East Merseyside
East Merseyside is the fifth most prosperous place in England for buy-to-let, according to our data. With an average yield of 6.90%, it’s still considerably above the average of 4.98%. Popular areas here include Knowsley, St. Helens, Sefton and Wirral, the latter being well known for its many exhibitions and events that take place throughout the year, including the annual Heritage Open Days.
A snapshot of England's buy-to-let locations with the lowest yields
Location | Average Monthly Rent | Average purchase price [1] | Associated costs | Gross Rental Yield | Net rental yield | |
01 | Wolverhampton | £750.00 | £331,878.40 | £3,220.00 | 2.71% | 1.74% |
02 | Camden and the City of London | £2,267.63 | £760,887.45 | £6,721.04 | 3.58% | 2.69% |
03 | West Essex | £1,799.74 | £593,311.15 | £5,480.00 | 3.64% | 2.72% |
04 | Dorset | £850.00 | £278,100.00 | £2,700.00 | 3.67% | 2.70% |
05 | Bromley | £1,605.92 | £522,869.07 | £4,836.36 | 3.69% | 2.76% |
06 | North and West Norfolk | £1,000.00 | £325,044.00 | £3,150.00 | 3.69% | 2.72% |
07 | Torbay | £1,395.00 | £453,067.60 | £4,390.00 | 3.69% | 2.73% |
08 | North Yorkshire CC | £778.51 | £252,655.15 | £2,440.00 | 3.70% | 2.73% |
09 | Cornwall and Isles of Scilly | £1,120.00 | £357,108.73 | £3,455.00 | 3.76% | 2.80% |
10 | Kensington & Chelsea and Hammersmith & Fulham | £3,104.96 | £986,075.69 | £8,716.36 | 3.78% | 2.89% |
[1] Purchase price, based on Molo’s internal data, combines stamp duty and conveyancing cost when applying for a buy to let mortgage.
Which locations aren’t as good for buy-to-let?
Wolverhampton
An average property price of £331k combined with monthly rents of £750 gives Wolverhampton a yield of just 2.71%, according to our data. This makes it the lowest areas in England for yields. It does, however, enjoy a prime location in the centre of the country with excellent transport links to the likes of London, Birmingham and Manchester.
Camden and the City of London
The boroughs of Camden and the City of London are some of the most sought-after postcodes in England. While an average monthly rental income of £2,200 looks promising, high purchase prices above £700k bring the yield down to just 3.58%. With areas like Camden and St. Paul’s popular tourist hotspots and prime London locations, it’s nor particularly surprising to see high property prices.
West Essex
Essex is generally considered an excellent place to live for commuting to London. Moreover, it offers a mix of vibrant towns, lush countryside and beachside location. But West Essex, which includes Chingford, Epping and Loughton, doesn’t fare as well as others in terms of yields. Its average yield of 3.64% makes it the third lowest place in England.
Dorset
Dorset is often regarded as one of the best places to live in England, with areas like Christchurch, Bridport and Dorchester particularly in demand. When it comes to buy-to-let investing, however, an average property price of £278k and monthly rental average of £850 contribute to a low yield of just 3.67%.
Bromley
Bromley is routinely awarded the distinction of being one of the safest boroughs in Greater London, but high property prices mean the area is the fifth lowest for yields in England. Average monthly rents sit in the region of £1,600, but property here is likely to cost you more than £500k, which leaves a rental yield of 3.69%.
Buy-to-let checklist
Investing in a buy-to-let property is more than picking the right location and involves smart decisions that align with your investment aspirations. To help steer you through the buy-to-let market, here’s a checklist so you have everything you need before investing in a rental property.
Investing in property offers a dual financial prospect: the potential for capital appreciation if the property’s market value increases, alongside the possibility of securing a steady stream of rental income. This is where the yield comes in, which measures property profitability and guides landlords in making informed investment decisions.
However, there are other factors to consider, like buy-to-let (BTL) mortgages. These typically require higher deposit amounts when compared to residential properties. Stamp duty is also another cost to consider as it’s usually higher on second homes. All of this should be taken into account when looking for the right mortgage deal.
Additionally, there are different types of mortgages, including limited company, HMO and holiday lets. Investors should also budget for additional expenses such as regular property maintenance and inevitable void periods – times when the property is unoccupied – which require coverage from personal funds.
An in-depth examination of the local property market is vital, as future development initiatives can significantly influence property valuations. Being able to identify an up-and-coming area could see you invest for a lower sum and enjoy the benefits of increased rental income and property appreciation over time. It’s worth looking at different areas, even if they’re located far from where you live, and comparing gross yields looks promising along with areas that are undergoing regeneration.
Your property represents a substantial financial commitment, and selecting the right tenants is akin to entrusting a valuable asset to someone you’ve just met. If you’re considering an agency, diligence is key. Assess its reputation, but also evaluate their tenant relations. Happy tenants often stay in properties for longer, reducing void periods. The vetting of potential tenants is equally as important. Where possible, meet with them to gauge their suitability and understand their motivations for moving. Establishing rapport from the outset can pave the way for a harmonious landlord-tenant relationship, which can be beneficial in the long term.
Ensuring compliance with legal requirements is vital for landlords. Secure an Energy Performance Certificate (EPC) valid for 10 years, and annually renew the gas safety certificate by a Gas Safe engineer. You may also need to conduct a Legionella risk assessment to guarantee a hazard-free home. Working smoke alarms will need to be installed on each floor, and carbon monoxide alarms in rooms with solid fuel. You also have a legal obligation to verify tenants’ Right to Rent, including giving them the ‘Right to Rent’ handbooks. Failure to do so can result in penalties and, at worst, a prison sentence.
As a landlord, you need to decide if you want to manage the property yourself or use a property management company. Employing a professional offers numerous advantages, from trusted maintenance contacts to a better understanding of the legal aspects. Agencies act as an intermediary with tenants and provide expert guidance, ensuring landlords meet all regulatory requirements. However, it comes at a cost, with property managers typically charging 10% to 15% of the annual rental income.
The methodology behind the numbers
Molo carried out research on every area of England to see where the best and worst 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
