Landlords

What property types generate the best return?

Warren Lewis
|
3rd December 2019
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According to the latest research from the National landlords Association, landlords might think that letting their property to a major international company or high-flying executive would generate top dollar, but they would be wrong.

The data, collected by the NLA, found that the average rental yield on property rented by companies or executives was just 4.9%—the lowest of any tenant type. The main reason for this was that the properties typically require significant upfront investment to match the high-spec expectations of the tenants.

The NLA, found that the tenants generating higher than the average rental yield of 5.6% included migrant workers (6.5%), students (5.9%) and retired people (5.8%).

These types of tenants are actually easier to find than executives, who accounted for just 2% of tenants. Migrant workers, students and retired people accounted for 7%, 14% and 11% of tenants respectively. The biggest tenant groups—families with children (52% of all tenants), young couples (48%) and young singles (43%)—offered rental yields that matched, or nearly matched, the overall average.

The NLA also found that the big detached house—the kind of favoured by richer tenants and families—was the least profitable type of property, generating an average rental yield of just 5.4%. By contrast, the house in multiple occupation (HMO) and the humble bungalow were the most profitable, generating an average rental yield of 6.5% and 6.2% respectively.

Richard Lambert, Chief Executive Officer of the National Landlords Association, said: “The private rented sector has grown because there is an alignment of interests between landlords and tenants. There is high demand for rented property from particular groups of people — migrant workers, students, and retirees — and these are precisely the people who offer landlords the best return on their investment. They are also the people who will bear the brunt of government policies which end up pushing landlords out of the market.”

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