Undertake careful research before entering rental market

by Daniel Jones

With stories abounding about rising rental yields and the potential profits on offer by renting out a room or property, more and more first-time landlords are entering the private rental market.

"A high demand for rental accommodation and a lack of supply of properties to let has helped to push up monthly rental values and the yields landlords can achieve," says Tim Wardley, divisional managing director for Connells. This, he adds, is helping to make "buy to let a very attractive investment".

While there is a great opportunity to make money, particularly for property owners near to the Olympic Park in London, it is import would-be landlords are careful when they start out.

Malcolm Harrison, spokesman for the Tenancy Deposit Scheme, notes that rental yields vary across the country. "It depends on the value of the property and its location, but yields overall are healthy. You can no longer talk nationally; you have to talk area-by-area and region-by-region," he explains.

Research from Paragon Mortgages published this month showed a significant regional shift in the rental yields achieved by landlords. The highest average yield was found in the north-west, generating a yield of 6.6 per cent.

Central London, where rents are highest, produced yields of 5.9 per cent for landlords. Meanwhile, Hometrack reported that rents in London were up 9.6 per cent in 2011.

Mr Harrison notes that while a yield from rental property in central London "may not be much ... the capital appreciation is probably going to be good".

Whatever the figures suggest, the advice for first-time landlords is to "take care" and carry out thorough research beforehand on the area in which they are looking to operate.

"You need to look for all of the things that you have always looked for when investing in buy to let and that is a good mix of economic activity or for it to be on a commuter line or good transport links et cetera," explains Mr Harrison.

"If all of those things tot up and your rental price is going to be sensible for that local rental market and won't be too much, then it is probably, all things being equal, a good investment."

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Published on: April 26, 2012

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