It is a tough time to be a landlord amid rising costs and more regulations, while rental growth is also slowing.
Property investors now face higher stamp duty rates when purchasing additional properties and new legislation going through parliament will ban no-fault evictions, all adding to the complexity of running a buy-to-let portfolio.
Additionally, data from Zoopla this week showed rental growth is at a three and a half year low of three per cent. That is down from 7.4 per cent this time last year.
The property website blamed the slowdown on rental affordability as tenants can no longer afford the double digit increases of the past.
Despite these challenges, landlords can still secure inflation-beating returns from buy-to-let even with a small deposit. Here is where to invest in the UK with just a £25,000 deposit.
With house prices at record highs, it can be hard to find a suitable buy-to-let property with just a £25,000 deposit in popular areas such as the south east and London.
But many tenants are already priced out of the major cities and are looking to more affordable areas, particularly in the north of the country.
This could provide a boost for landlords.
Louisa Sedgwick, managing director of mortgages at Paragon Bank, which recently revealed research showing rental yields have hit a 13-year high of 7.12 per cent across the UK, said: “Although the strongest returns on buy-to-let investments are often generated through Houses in Multiple Occupation, owing to their ability to house multiple tenancies, these large properties typically command higher purchase prices.
“To make the sums work, an investor with a £25,000 deposit would likely need to target a more affordable property. An example could be a smaller terrace or home in an area where property is more affordable, such as some of the areas in the north of England.”
Research by Hamptons, for Independent Money shows investors can expect double-digit gross yields in five out of the 12 local authorities in the north of England and Wales where the average buy-to-let property can be purchased with a £25,000 deposit.
For example, £25,000 would be more than enough for a 25 per cent deposit and stamp duty to cover the purchase of the average flat in the Welsh town of Blaenau Gwent near Cardiff. The average property price for a flat is £72,780 and you would need upfront costs of just £21,839. With a monthly rent of £671, you could get a gross annual yield of 11.1 per cent.
Similarly, in County Durham, Hamptons data shows the average flat is currently priced at £79,750. A landlord would need just £23,928 to cover a 25 per cent mortgage deposit and stamp duty. The average rent in this area is £689 per month, giving a gross yield of 10.4 per cent.
