We’re often presented with lists and charts of the best and worst investment locations for property investors and while they always make for interesting reading, it’s sometimes difficult to decipher what criteria the ranking has been determined by.
Here at Letting Solutions we feel that one of the best ways to determine a truly profitable buy-to-let investment location is simply by looking in detail at the average yield.
That’s why, then, a recent study released by property website Zoopla which ranked student investment locations by yield particularly caught our eye.
Yields are calculated by expressing the property’s annual rental income as a percentage of the investment. For example, if your rental home is worth £200,000 and you charge a monthly rent of £1,500, your gross annual yield will be 9%. This is calculated by multiplying £1,500 by 12 months of the year which equals £18,000. Next, £18,000 divided by the value of the property (£200,000) and multiplied by 100 comes to the yield of 9%.
Of course there are a number of additional costs you will need to factor in to give you a truly accurate yield – we’ve blogged about this before and you can access that information here.
The key message of the Zoopla study is that if you’re looking to invest in student property, then Scotland really is the place to be. It found that four of the top ten student investment locations in the UK are located here in Scotland, while none of the ten locations with the worst average yield are located north of the border.
Looking a little more closely at the report, it is clear that investing in the areas surrounding the University of Glasgow (5.07% gross yield), the University of Dundee (5.11% gross yield) and the University of Aberdeen (5.66% gross yield) are all extremely profitable for landlords.
Looking even closer to home, topping the charts is the area surrounding the University of Edinburgh, which has an average gross yield of 6.11%, according to Zoopla.
This is calculated from an average asking price of £426,774 and an average monthly rent of £2,171 for a four bedroom house.
As you can see investing in an area close to a university or popular college could be fruitful for a landlord and we have previously weighed up the pros and cons of student investment, which you can read here.
If you are thinking about letting your property, please contact us on: 01506 496006. Moreover, you can find out how much your property could secure in monthly rents using our online free property valuation tool.