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What type of property obtains the best rental yields

Currently annual rental rates are increasing by approximately 1.3% in most areas of central London, it is clear that there is plenty of room for solid returns in the lettings market.   For those that are considering investing in a rental property, or wishing to become a portfolio landlord looking to increase your selection of properties, then a key factor will be the potential yield that the property could return.

When considering the terms of rental yields, Houses of Multiple Occupancy (or HMOs) are increasingly ever more popular as investment properties and are widely viewed as the future of the rental market. HMOs were in previous years mainly a staple of the student lettings market; however, this is now changing, and young professionals are certainly part of a growing tenant population favouring this rental configuration. For landlords, the maths are  simple; multiple tenancies operating independently in one property increases rental yield significantly and therefore void periods are far less of a problem.

Research by the National Landlords Association found that average rental yields sit at 6.9% for HMOs, some 1.3% higher than other properties. However, there are other considerations if you are thinking of buying a property with a view to let it out to multiple independent occupants; bedroom sizes must be at least 6.51 square metres and some HMOs will require a license, obtainable from the local council.

Properties within city centres are proving to be extremely popular and demand is rife for centrally located homes on the rental market. Bearing this in mind, purchasing a flat or apartment could prove to be a shrewd move if you are looking to maximise your rental yield potential; with competition amongst renters keeping the prices of well-located properties high and avoiding those dreaded void periods of non-occupancy.

Houses with two bedrooms or more are by far and away the most popular choice amongst renters, whether they are detached, semi-detached or terraced. With the average age of the first-time buyer now at 30, more and more families are renting up until this point, so multiple bedrooms are a must. Appealing to this family and young professional market will help you to achieve your desired rental values and could potentially secure you longer tenancies with tenants willing to sign up to three-year contracts.

In general, there is no one single property which is guaranteed to give you a specific rental yield. Investing in property remains one of the most stable investment classes, and despite periods of ups and downs, in the long term it is difficult to find a more lucrative venture.