Students the best bet for highest yields, says Paragon

Students and young singles generate the highest yields for landlords, buy-to-let mortgage specialist lender Paragon has revealed.
 
Paragon used independent research to find  that students generated an average yield of 6.45%, while  young singles generate 6.22%.
 
Retired people are also high up the table (6.16%), followed by white collar / professional workers and executive or company lets (both 6.13%).

At the other end of the scale, non-housing allowance benefit claimants generate the lowest yields at 5.78%, followed by young couples and manual workers (5.94%).
 
Yields – a property’s annual rental income as a proportion of its current value – are an important factor for landlords when making a property purchase decision. The average yield across the market currently stands at 6.2%, Paragon claims.
 
Nigel Terrington, Paragon Group chief executive, said: “Yields are an important component of a landlord’s overall business plan because they give a good indication of the income that the property generates.

“Of course, returns for many landlords will often be higher than stated yields as these are calculated at the current rental income against the property’s value today, not taking into account capital appreciation since the landlord purchased the property or their loan-to-value.”
 
He added: “Student yields typically outperform the wider market because they are let on a per room basis, which can generate higher rental income. On the downside, they tend to require a higher degree of maintenance, so landlords have to factor that cost into their overall business models.”
 
Elsewhere, the research shows that the number of properties in a landlord’s portfolio has little bearing on its overall yield. For example, landlords with one property generated the same average yield as those with over 20 properties (6.2%), while those with between two and four properties in a portfolio generated a yield of 6.5%.
 
However, there was clear contrast at a regional level, with yields in the West Midlands outstripping the rest of the UK at 6.5%. These were followed closely by Yorkshire & Humber (6.4%) and the North-East (6.2%). Central London lagged in the yield stakes (5.5%) due to the high cost of property there.