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Three or more bedrooms produce biggest yields for landlords, research suggests

Houses with three bedrooms or more result in higher yields of landlords in the private rented sector in the UK, research suggests.

The latest figures from online buy to let agency Yieldit shows that these types of properties are producing net yields of up to 11%.

The firm says that this indicates that properties which can house multiple tenants or larger families might make a smart investment choice, with returns additionally increased by houses often being freehold rather than leasehold, not paying a service charge and self-managing.

When looking at property type in relation to yields, houses once again came out on top, with average net yields of 6.4%, followed by studios at 5.3% and apartments at 4.9%.

The data from Yieldit also exposed a notable difference in average yields between one bedroom and two bedroom apartments, with the average one bedroom apartment commanding a 1.4% higher net yield than a two bedroom apartment, at 5.4% and 4% respectively.

This indicates a greater demand for one bedroom apartments, particularly in city centre markets where couples may struggle to afford the luxury of a spare bedroom. Instead many are opting to rent one bedroom apartments, or alternatively renting in a larger group, in homes with more than two bedrooms.

Breaking down the numbers further revealed that one bedroom apartments with parking actually had a slightly lower net yield at 5.2% on average, than one bedroom apartments without parking at 5.5%.

‘Deciding on what type of property to invest in is one of the biggest choices a landlord has to make,’ said Ryan Hughes, head of sales at Yieldit.

‘Houses suitable for families remain a popular choice, and yields can be significantly higher when you remove costs like ground rent, service charge and self-manage, however, it’s important to note that this type of property might require more work and unexpected maintenance costs could affect annual returns,’ he explained.

‘For those looking to invest in apartments, the data suggests that there is a growing demand for one bedroom apartments without parking. As environmental issues become more prevalent we can expect to see tenants opt for more environmentally friendly ways to travel and an unwanted parking space might push up the price for renters,’ he added.