The locations offering the best buy-to-let returns have been revealed, with Scotland leading the way.
The top four areas include Glasgow, giving a return of 7.7 per cent, Inverclyde at 7.1 per cent, Midlothian at 6.9 per cent, and West Dunbartonshire offering a 6.9 per cent return on your investment.
The national average sits at 4.9 per cent, based on average rents of £11,436 and house prices of £234,370, according to the study by lettings group Howsy.
The group based its research on a simplistic calculation of rental yield, by multiplying the monthly rent by 12 to get an annual rental figure.
This figure was divided by the purchase price of the property and then multiplied by 100 to get a basic rental yield percentage.
In other words, it means that if the rent you get on two separate properties is the same, your rental return will be higher on the lower priced property.
The calculation used in this research may be considered an over-simplified measure of yield as it doesn’t take into the account the true cost of a property, such as how much you pay for your mortgage.
Taking into account costs like a mortgage offers a better measure of the rental yield available on a property – but it’s a far more complex calculation.
The research suggested that Scotland produced many of the highest returns, with 18 out of the top 20 places with the best rental yields being north of the border.
Burnley is ranked at 6.5 per cent, which is the highest rate outside of Scotland and across England.
Other locations include Belfast in tenth position at 6.2 per cent, while County Durham and Blackpool were ranked in position 17 at 6.2 per cent and position 18 at 5.7 per cent respectively.
Rental yield is widely considered the driving motivation for property investors, although some may want to consider other issues such as location and their upfront costs.
Calum Brannan, Chief Executive of Howsy, said: “There are a whole host of costs to account for when investing in a buy-to-let property but the most important is, of course, the rental income available.
“However, high rental income doesn’t necessarily mean an area offers the best investment option and if it requires a high initial cost to buy the property, you could be recouping that investment for longer than you might in other areas with a lower rental income.
“It’s about finding that balance and areas such as Glasgow not only offer a relatively affordable property cost to begin with, but the rental income available as a proportion of house price is far higher than anywhere else in Britain.”
What were your main considerations when deciding to buy your rental property? Let us know in the comments below.
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