Which Type Of Residential Investment Property Provides The Best Rental Income Yield?
As a landlord, when you are considering buying a residential investment property to let out you may be making the purchase for a couple of reasons. Firstly, you hope that should you ever come to sell the property in 10 to 30 years time that it has increased substantially in value and secondly you are looking to achieve a good rental income from it.
The type of property that you buy could have an impact on both of the above things but let’s focus on the latter – the rental income yield.
Mortgages for Business produce a Complex Buy to Let Index each quarter that looks at details of mortgage transactions on Vanilla Buy to Let properties (i.e. standard 2 to 4 bed houses and flats), Multi-unit Freehold Blocks (i.e. purpose built flats), Houses in Multiple Occupation (i.e. private houses for students to let with their own locked bedroom doors and shared kitchen/bathroom) and Semi-Commercial Property (i.e. shops with flats above).
You may be interested to know that the index also provides information about the gross average rental income yield the above types of property produce. Obviously, the figures can change going forward but we thought that you may find some of them useful to look at as part of your due diligence should you be considering buying an investment property to rent out.
Vanilla Buy to Let – Gross Average Yield
Q4 2013 5.9%
Q1 2014 6.4%
Q2 2014 6.3%
Q3 2014 5.9%
Multi-unit Freehold Blocks – Gross Average Yield
Q4 2013 6.8%
Q1 2014 6.2%
Q2 2014 7.3%
Q3 2014 8.6%
Houses in Multiple Occupation – Gross Average Yield
Q4 2013 10.4%
Q1 2014 9.6%
Q2 2014 9.3%
Q3 2014 8.9%
Semi-Commercial Property- Gross Average Yield
Q4 2013 4.8%
Q1 2014 4.2%
Q2 2014 7.1%
Q3 2014 9.7%
The above reveals that Vanilla Buy to Let properties have not provided as much rental income as the other three types of investment property covered in the index for either Q 2 or Q3 in 2014. In fact, Houses in Multiple Occupation have outperformed Vanilla Buy to Let properties in each of the last four quarters.
We trust that the above proves of assistance to you.