Student landlords are likely to own rental properties returning the best yields, according to new research.
Shared student house generate average yields of 6.45% against an average of 6.2% for all other tenants.
The best regions for highest average rental yields are the West Midlands (6.5%), Yorkshire and Humber (6.4% and the North East (6.2%). All other regions return a below average yield.
Central London has the worst average yield (5.5%) due to the higher cost of housing.
The findings come from research by specialist property investment mortgage lender Paragon.
Yield is calculated by dividing a letting property's annual rental income by the value.
Calculating yields helps with assessing profitability and comparing two rental properties against each other.
“Returns for many landlords will often be higher than stated yields as these are calculated at the current rental income against the property's value today, not taking into account capital appreciation since the landlord purchased the property or their loan-to-value,” said Nigel Terrington, Paragon’s chief executive.
"Student yields outperform the market because they are let on a per room basis, which can generate higher rental income. On the downside, they tend to require a higher degree of maintenance, so landlords have to factor that cost into their overall business models."
Other results from the survey look at portfolio yields and how serving different market segments affects returns on investment.
The size of a property portfolio had a marginal bearing on yields - average yields for landlords with more than 20 properties had an average yield of 6.2%, while those with twoto four properties generated a yield of 6.5%.
Besides students, young professionals were the only other tenant category producing an above average yield at 6.22%. The worst yields were from letting to benefit claimants, which returned an average yield of 5.78%.
Landlords letting to these tenants could see their yields drop even further as a result of proposed government cuts to benefit payments.
