Areas in Birmingham have been named the best postcodes for buy-to-let, with landlords in the West Midlands experiencing the best rental yields in the UK.
Research by property peer-to-peer lending platform LendInvest reveals the highest rental returns by postcode for the first quarter (Q1) of 2015. They can be found in Birmingham, Ipswich, Liverpool and Glasgow.
Despite Birmingham significantly beating London, postcodes around North and central London still offer the best overall return on investment, due to capital gains achieved by increasing house prices.
The rental yield is calculated by taking the annual rental income and working it out as a percentage of the property price.
LendInvest took the average asking rental price per year and divided it by the average asking price on the property, using 1,000,000 sales figures and 500,000 rental listings from Zoopla. The findings were then split into the first part of the postcode, called the outcode.
Four of the top ten highest rental yields were in Birmingham, with 13.6% in B44, 11.9% in B42, 10.5% in B98 and 9.1% in B23.
In Ipswich, landlords can achieve 10.8% returns in IP4 and 9% in L28 in Liverpool. Glasgow areas, G34, G21 and G22 yield 11.9%, 10.1% and 9.2% respectively.
Managing Director of Property Let By Us, Jane Morris, comments: “Many landlords tend to invest near to where they live, but if they look further afield, they could easily increase their yields and capital growth.
“The Midlands provides a great investment opportunity as the property is much more affordable than the South East and the yields are high. For example, in Coventry, a three-bed semi will cost around £125,000 and will provide rental yields of around 6.57%.
“Many of the landlords that we work with are netting between 6.57% and 9.1% from their properties in Birmingham, Coventry and Nuneaton. My advice to any landlord looking to invest outside their area is: Carry out thorough research on property prices, rent prices and yields, to ensure they make the right investment.”1