How to Choose the Right Property to Let Out

Put simply, in the world of buy-to-let property, your rental yield is your return on investment.

This is the clearest indicator of what you can expect to earn from an investment, making it one of the most important factors to consider.

Rental yields can vary significantly depending on things like the quality of the property, the range of facilities available to residents (if it’s part of a larger development) and, of course, the location.

What Is a Good Rental Yield?

So, what is a good rental yield, and what sort of rental income can you expect from a UK buy-to-let property in 2023?

A solid rental yield typically sits at around 6%, which is a return that can be expected from most central city districts in the UK.

According to the most recent house price index, the average UK rental yield is 5.08%, so if your property is hitting the 6% mark, then it’s generating a solid return.

Depending on the quality, location, residential facilities, and investment type, however, higher rental yields are more than achievable in key UK cities.

The brand new Rice Works Liverpool development, for instance, has the potential to generate returns of up to 15% thanks to its premium location along the city’s waterfront and the C1 planning consent that enables each apartment to be rented as a short-term let – another highly lucrative investment strategy.

When choosing the right property to let out, quality is key. While a property may be in a perfect location that has excellent capital growth potential, it will not attract consistent tenant demand and importantly, yield high returns unless it is of a certain standard.

With this in mind, it’s essential to ensure that the property you decide to invest in is of a quality that justifies a good rental income, one that makes the investment worthwhile in the long run.

A good starting point in this regard is carrying out sufficient research on the property developer. In popular cities like Liverpool and Manchester, the majority of quality investment properties on the market are part of larger developments located in central districts.

Oftentimes, these developments are in construction when the properties go on sale, which is referred to as off-plan property. While this usually enables investors to purchase properties for below-market value and is a great investment strategy, it’s important to have confidence in the developer before making any financial commitments.

Having a look at a developer’s portfolio or even getting in touch with a property investment company that’s worked with them in the past and organising a viewing is an excellent way to determine whether the property you want to invest in will be of a high standard once complete.

Today, in addition to high-quality living spaces, top rental properties usually come with access to a range of on-site facilities such as:

• Fully-Equipped Gyms
• Swimming Pools
• Spa
• Residents Lounges
• Roof Terraces
• Concierge Services

When it comes to the top passive income ideas UK buy to let property has proved one of the most stable during challenging economic periods like the one we currently face.

Although mortgage and inflation rates are at record highs, there remains a supply and demand imbalance across the UK that makes rental property an assured earner; particularly when many first-time buyers are deciding to hold off for the time being.

From an investment perspective, it’s also important to understand that current interest rates can easily be avoided by investing in off-plan property, which doesn’t require a mortgage until the development in question is approaching completion.

Additionally, 2023 presents a unique and potentially lucrative opportunity to invest in buy-to-let property. This stems from the dip in property values that have characterised the UK market this year due to rising mortgage rates and a prolonged cost of living crisis.

At present, property prices are generally lower than they have been at any time since the pandemic. However, according to the latest mainstream regional market forecast, these values will again begin to rise over the next year, with regions like the North West set to grow by up to 11.7%.

Rental values are also set to rise as demand for property in rapidly growing and more affordable UK cities continues to increase. Sticking with the North West, key cities like Liverpool are expected to experience rental value growth of at least 10% between now and 2026.