The Best Returns By Property Type Revealed

AFS Team·5 December 2019·4 min read
The Best Returns By Property Type Revealed

The Best Returns By Property Type Revealed

For those landlords who are looking to invest, then the best returns by property type could have a big influence.

And figures from the National Landlords' Association (NLA) reveal some surprising results.

For example, those landlords who believe that letting a property to a high-flying executive or a major international employer will be disappointed.

That's because researchers found that on a property being used by employers, the average rental yield is just 4.9%, which is the lowest of any tenant type.

The reason for the low return is that the landlord will need to invest significantly to match their tenant's high expectations.

Instead, the NLA says that the tenants who generate higher than the average rental yield of 5.6% include retired people on 5.8%, students with 5.9% and migrant workers on 6.5%.

'Tenants are easier to find'

Also, these tenants are easier to find than executives are - who only account for 2% of the market.

In the private rental sector, retired people account for 11% of the market, students make up 13% and migrant workers account for 7%.

The largest tenancies are for families with children, who account for 52% of all the sector's tenants, followed by young couples on 48% and young singles, with 43%.

Also, large detached homes, usually favoured by families and richer tenants, tend to be the least profitable properties with a yield of 5.4%.

The best investments are for a house in multiple occupation (HMO) which can deliver a yield of 6.5%, while a bungalow will return 6.2%.

The NLA's chief executive, Richard Lambert, said: "The private rental sector is growing because of an alignment of interests between tenants and landlords.

"There is high demand for particular groups of people for rented property, including retirees, students and migrant workers, and it is those who offer landlords the best investment return."

He added: "They are also the ones who will bear the brunt of government policies that will push landlords from the market."

AIIC welcomes deposit scheme with inventory reporting

Meanwhile, the Association of Independent Inventory Clerks (AIIC), has welcomed the first deposit scheme in the UK that requires inventory reporting.

The in-house scheme has been unveiled by Hamilton Fraser as an independent service that requires reporting that is evidence-based when the tenancy begins and ends.

The AIIC's chairman, Danny Zane, said: "in 2007, when deposit protection was launched, it should have been with reporting offering evidence to protect tenants, landlords and the deposit."