December 8, 2023 4:01 pm

Insert Lead Generation
Nikka Sulton

Interested in investing in rental properties in 2023? To maximize your return on investment, consider locations with the highest rental yields. Rental yield, calculated as the annual rental income divided by the property’s value, is a key metric. Higher rental yield means better returns. In this blog, we’ll reveal the top UK rental yield hotspots for 2023 and offer tips for spotting great investment opportunities.


Is renting houses still a worthwhile investment?


Advantages of buy-to-let:

  • rental income potential, though it varies by location (e.g., Liverpool, Glasgow, and Leicester offer yields as high as 8%).
  • possibility of capital growth as property values increase.
  • option to obtain insurance for rental income loss, damage, and legal costs.


Disadvantages of buy-to-let:

  • higher tax liability compared to previous years, impacting profits.
  • risk of no income if the property remains unoccupied without proper insurance.
  • potential capital reduction if property prices decline, especially with interest-only mortgages.
  • expenses to consider, including stamp duty, insurance, and maintenance costs.
  • Landlord responsibilities can be substantial and require careful consideration.
  • Some individuals use buy-to-let for retirement income, withdrawing substantial sums from their pension funds.

This assessment helps investors weigh the pros and cons of buy-to-let investments based on their specific goals and financial circumstances, accounting for tax changes and market conditions.


Things to Know Before Becoming a Landlord

Entering the landlord realm demands careful consideration, beyond mere financial gains. It’s a significant decision influenced by solvency and future investment. Before embarking on this path, grasp these five essential insights for prospective landlords.


1. There are rules which you must follow

Embarking on the journey of becoming a landlord demands a solid understanding of rules and laws governing the rental landscape. Here’s an in-depth exploration:


  1. Tenant Interviews:

   Delve into the nuances of what you can and cannot ask potential tenants. Familiarize yourself with the legal boundaries to conduct interviews that are fair and within the parameters of the law.


  1. Security Deposits:

   Gain comprehensive knowledge about the procedures and regulations surrounding security deposits. Understanding the proper handling of these financial aspects ensures compliance and fosters trust between you and your tenants.


  1. Property Upkeep:

   Recognizing your responsibilities for property maintenance is pivotal. Grasp the legal requirements and expectations for keeping the property in optimal condition, ensuring the well-being of your tenants and the longevity of your investment.


  1. Eviction Process:

   Navigate the complexities of the eviction process with a clear understanding of the steps involved. From identifying problematic tenants to executing the eviction legally, equip yourself with the knowledge to handle challenging situations effectively.

As a landlord, these critical aspects not only ensure legal compliance but also contribute to effective property management, fostering a positive and secure rental environment.


2. Being A Landlord Means Unconventional Working Hours:

   Being a landlord isn’t a conventional 9 to 5 job. While you enjoy independence, tenant issues can arise at any time, demanding immediate attention. Prepare for unstructured days and spontaneous calls, ranging from routine matters to urgent crises that require prompt resolution.


3. A Landlord Has Varied Job Roles:

   Your role as a landlord extends beyond the title. You may find yourself donning various hats:

  • Letting Agent: Handling all tasks related to letting your property.
  • Salesperson: Presenting your property becomes a persuasive sales pitch.
  • Negotiator: Navigating tenant negotiations with firm yet fair approaches.
  • Debt Collector: Addressing non-payment of rent requires tactful handling.
  • Handyman: Basic skills for handling minor repairs can prove invaluable.
  • Therapist: Occasionally, tenants may seek emotional support and understanding.
  • Detective: Conducting thorough referencing and credit checks for potential tenants is crucial.

Becoming a landlord entails diverse responsibilities, requiring adaptability and a multifaceted skill set.


4. Anticipate a Learning Curve:

   Being a landlord involves an ongoing learning process. Regardless of your research, unexpected challenges will arise. Minor issues may persist, while major problems can suddenly consume your time. With experience, you’ll better recognize potential complications and learn to identify warning signs from past tenant experiences.


5. Rewards of Hard Work:

   Despite the challenges, the hard work invested in being a landlord reaps rewarding outcomes. Whether aiming for financial freedom or building a property portfolio, the role offers independence, financial gains, and a sense of control. Putting in the effort can lead to the satisfaction of achieving personal goals and potentially growing a property empire over time.


Is becoming a landlord even worth it?

Yes. One hundred percent yes.

Play by the rules, be sensible, and you’ll make it through with good fortune.


How do I get started with buy-to-let?

Becoming a landlord involves several practical steps, devoid of flowery language. Here’s a straightforward breakdown as of September 2023:


Step 1 – Financial Preparation:

– Consult a financial adviser to determine your investment amount and expected returns.

– Engage with a mortgage broker to secure a favorable deal or mortgage in principle for swift property offers.


Step 2 – Property Acquisition: 

– The process of finding and acquiring a rental property may vary in duration but should be allocated several months.


Step 3 – Insurance Coverage: 

– Alongside buildings insurance, consider safeguarding against unexpected expenses like tenant injuries, property damage, and rental income loss.


Step 4 – Tenant Selection: 

– Choose between using a letting agency or private tenant selection, depending on your preferred level of involvement.

– Even when renting to acquaintances, ensure a legally binding tenancy contract is in place to avoid potential disputes.


Step 5 – Ongoing Management:

– Continuously review your mortgage terms as they expire and perform necessary property maintenance.

– Optimize your buy-to-let income for tax efficiency with the assistance of an accountant.


This guide outlines the practical steps involved in becoming a landlord, emphasizing the importance of financial preparation, insurance, tenant selection, ongoing management, and tax considerations.


Top 7 Areas With the Best Rental ROI in the UK

These areas are: 


  1. Yorkshire:

   – Yorkshire boasts two districts in the top 10.

   – Average annual return: 9.9%.

   – Average property asking price: £280,000.


  1. Cardiff:

   – Cardiff has two districts in the top 25.

   – Average annual return: 8.6%.

   – Average property asking price: £173,000.


  1. Southampton:

   – Southampton reports an average annual ROI of 8.6%.

   – Average property asking price: £214,000.


  1. Newcastle Upon Tyne:

   – Newcastle features three postcode districts in the top 25.

   – Average annual return: 8.5%.

   – Average property asking price: £166,000.


  1. Swansea:

   – Swansea has two districts in the top 25.

   – Average annual ROI: 8.5%.

   – Average property asking price: £203,000.


  1. Leeds:

   – Leeds boasts two districts in the top 25.

   – Average annual return: 8.2%.

   – Average property asking price: £179,000.


  1. Glasgow:

   – Glasgow offers a decent annual return of 7.7%.

   – Lowest average property asking price among top performers: £115,000.

   – Glasgow has two districts in the top 25.


These figures provide a clear overview of the attractive rental investment opportunities in various UK areas, focusing on annual returns and property prices.


What about the Renters (Reform) Bill – is it bad news for landlords?


Renters Reform Bill Impact on Landlords:

The majority of landlords who already manage their properties professionally and care for their tenants well should not be significantly affected by the Renters Reform Bill, provided its contents don’t change significantly. Our landlord research indicates that 40% of landlords surveyed stated that the bill would not alter their property investment approach, while 33% said it would, with 27% still undecided.


Renters Reform Bill Highlights:

– There will be a fee for signing up to the Ombudsman and the new portal, but the government assures it will be “proportionate and good value.”

– The removal of Section 21 evictions is not expected to make a significant difference for most landlords. Section 8 grounds for eviction will remain an option.


Decision-Making Steps for Landlords:


If you’re uncertain about holding onto your rental property or selling it, consider these steps:

  1. Check Your Cashflow: Examine your ongoing expenses and ensure your property or portfolio remains profitable.
  2. Know Property’s Current Value: Assess recent capital growth, which may offset any loss in income or monthly profit. Get an accurate market valuation from your local branch.
  3. Calculate Break-Even Point: Consider mortgage rates reaching 7-8% and evaluate if you’d still make an acceptable profit or could handle losses until rates fall.
  4. Explore Refinancing: If your property’s value has risen significantly, refinancing at a lower loan-to-value ratio (LTV) may secure a better interest rate, potentially reducing mortgage costs.
  5. Evaluate Investment Objectives: Ensure the property aligns with your investment goals. If it covers its own costs and meets your objectives, selling may not be necessary.

Local property market variations can be substantial, so consulting with local experts, like your branch’s team, is advisable to understand your immediate area’s dynamics and rental market prospects in the coming months.



More Property Blogs HERE: 

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Section 24 Effect on BTL Property

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How do I start a property rental business in the UK?

How to add value to your rental property

What are the requirements for a HMO UK?

How to convert a property into an HMO in 2023

Is refinancing the same as restructuring?

What is Refinancing? How does it Work?

BRR Property Deals: Buy Refurb Refinance in the UK

Should You Give Up on Buy-to-let?

A Guide to Section 24 Tax Change For Buy-to-Let Investors

Do I need a Licence to rent out my property UK?

Property Investing Strategies Using BRRR

What is the criteria for HMO in the UK?

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