Have you ever considered Scotland as a good location for buy to let investing? Well according to a report by Source Capital you should definitely do that. The report identified the UK locations that provided the best potential buy to let yields and Scotland came out on top.
The best areas in Scotland for buy to let returns were revealed as:
- Glasgow with a 7.7% return
- Inverclyde with a 7.1% return
- Midlothian with a 6.9% return
- West Dumbartonshire with a 6.9% return
At the time of publishing the report, the average buy to let return in the United Kingdom was 4.9% based on an average house price of £234,370 and an average rent of £11,436. These figures were revealed in a Howsy Lettings Group study.
How they Calculated Buy to Let Yields
The report used a pretty simple calculation to establish rental yields. First an annual rent figure was established by multiplying monthly rent prices by 12. Then they divided this figure by the property purchase price and then determined the rental yield percentage by multiplying this by 100.
To put this in perspective, if you have 2 properties that are both generating the same income from rent, then your yield will be higher if one of the properties was purchased at a lower price than the other.
You may find this approach to be too simplistic. It does not factor in the true cost of owning a buy to let property such as any mortgage payments for example. We recommend that you do consider other costs like mortgage payments to provide a more precise rental yield figure. It is a more complex equation but it is more realistic.
Scotland was Dominant for the Highest Yields
The report revealed that Scotland was dominant when it came to the highest buy to let yields in the UK. A top 20 location list was produced and 18 of the locations were in Scotland. Outside of Scotland, Burnley faired the best with a return of 6.5% which was the highest in England.
Belfast, Northern Ireland was in 10th spot with a return of 6.2%. Elsewhere in England County Durham produced a yield of 6.2% while Blackpool was reasonably impressive with a yield of 5.7%.
Consider other Factors with Buy to Let Investing
Most buy to let investors tend to view rental yields as the most important factor when assessing a property. But there are certainly some other factors that you need to consider such as any upfront costs and the location of the property.
Just because a specific location provides the highest rental yields does not have to mean that it is the best place to invest. You need to consider the initial cost of purchasing property and compare that to investing in areas that have lower property prices with slightly lower rental yields.
The report suggested that Glasgow was an ideal location for buy to let investment. This is because not only does it have the highest rental yields but it also has reasonably priced properties available.
As always you need to perform due diligence when buy to let investing. If you are not familiar with an area of the country then you need to find out all that you can about it. Take all likely costs into account when running your numbers.