What is the best city for a rental property investment?

Rental real estate investing can be an extremely lucrative business, but getting the right location is one of the ultimate factors for a successful result.

Choosing where to invest in a rental purchase will raise a number of questions. The target tenant, such as a student or professional, budget and management style will all play a role in the final decision, among other things.

To give investors who are unfamiliar with or would like to try out a new area a head start, Aldermore has developed a new Buy-to-Rent Tracker. It analyzes the main cities in the UK, and some cities, to come up with a list of places with the most promising prospects.

The tracker ranks cities across the country based on five key factors that impact their success rate. These are: the average total rent, the best short-term returns thanks to the yield, the long-term returns thanks to the growth in house prices over the last 10 years, the smallest number of vacant units compared to the total stock and the percentage of the city’s population in the private rental market.

The best of UK buy-lease

This year, the city of Bristol made a surprise appearance as the top rental location, with an increase of six places from last year. It obtained an overall score of 75 in all five areas of analysis. It stood out for its long-term growth in house prices and the lowest percentage of vacant rentals at 0.6%.

The downside to Bristol, however, is the cost of housing, which can make it unaffordable for some and affect monthly returns.

Aldermore says, “Any investor will need a large amount of money to invest. With an average Bristol house price of £ 348,543, the likely return will be only 4.6% on their purchase, well below the 5.9% average in the 50 cities.

Next come Oxford and Cambridge, who obtained 73 and 70 points respectively. Oxford has moved up two places from last year, while Cambridge has moved up from second to third. Like Bristol, while these cities can offer great benefits for rental owners, high property prices are a major drawback.

Manchester holds up

Manchester has featured prominently in the ranking of this tracker for several years now. In second place in 2019, it reached first place in 2020 with a score of 72. This year, despite falling to fourth place, it is still recognized as one of the best places for rental property investment in the world. UK.

Its economic growth makes it a sought-after and affordable place to live. In terms of rental yield, it performs very well with relatively affordable property prices combined with high rents. It has a large tenant population, its universities attracting students, and its strong and growing job market attracting graduate students and professionals.

According to Savills, house prices in the North West are expected to increase by 18.8% on average over the next five years, making Manchester and the surrounding area a promising location for capital appreciation.

A good time to review your portfolio

Jon Cooper, Head of Mortgage Distribution, Aldermore comments: “The City Tracker shows that the UK housing market is rich in diverse and unique conditions in areas that are ripe for investment opportunities. As we move towards a post-Covid environment, we hope this analysis will give many homeowners food for thought on where to look for those hidden gems and returns that meet their business strategies.

“Private landlords are a central part of the housing market, supporting over 4.5 million UK households and, as we emerge from the pandemic, homeowners will need to meet the emerging demand for choice and variety. tenants. With the economy opening up and EPC rating changes coming in 2025, now is a great time for owners to speak with their broker to determine where they want to take their portfolios in the future.