The best buy-to-let locations for landlords to invest £50,000

A series of punishing tax changes and higher borrowing costs have squeezed buy-to-let profits in the past year and triggered an exodus of landlords from the market.

Landlords sold 35,000 more properties than they bought during 2022, the largest net loss in three years, according to analysis by estate agency Hamptons. It has left a void of rental properties to be filled – a golden opportunity for investors who are prepared to take on the sector’s challenges. 

National rents jumped by 5.5pc in the year to August, the biggest jump on record according to the Office for National Statistics – a new record high for the sixteenth month in a row. This was boosted by the fact that in every region, demand from tenants is still wildly out of kilter with supply.

Buy-to-let specialists and advisers have reported a recent surge in investors looking to pounce on the opportunity for lucrative returns. 

With a budget of £50,000, landlords can tap into most regional markets and have a choice of investing in a flat or house. In this article, we take a look at the top locations with the highest yields for an investment of this size, all yielding an average of 8pc and above.

Where £50k will earn you the highest yields

Isle of Anglesey

House price growth in Wales consistently outpaced all other regions during the pandemic boom, but property values remain relatively low in comparison. Rental yields are typically highest where house prices are lowest, so the country is popular with investors. 

Anglesey, just off the mainland’s north-west coast, has the highest rental yield in England and Wales and is the only region with an average in the double figures, according to estate agency Hamptons. The region has an average gross yield of 10.1pc for investors with deeper pockets. 

A £50,000 budget would be enough to cover a 25pc deposit and stamp duty on a typical £142,500 flat or £161,920 terraced house on the island, according to Hamptons. An investor would need an upfront cash injection of £39,910 to cover a deposit and the tax bill on a flat and £45,340 on a small house. 

The average yield on a buy-to-let flat on the Isle of Anglesey is much higher than a terrace however. A landlord with a flat can expect a typical yield of 11.4pc with an annual gross rental income of £16,290. Meanwhile, a terraced house brings in a 9.6pc gross yield with £15,561 in annual gross income.

Rhondda Cynon Taf

The second-highest yielding location for an investor with £50,000 is also in Wales, in the southern region of Rhondda Cynon Taf. Investors here can buy a bigger property with cash left over for renovations or additional landlord costs.

The average semi-detached house here costs £162,990, according to Hamptons, which is significantly cheaper than the average £204,200 price for the same type of property in Isle of Anglesey.

Landlords would need £45,640 to cover a deposit and stamp duty on a semi-detached investment property in Rhondda, and would reap the benefits of growing tenant demand. 

The region has an average gross yield of 8.6pc, and landlords can expect rental income before expenses of £10,388 from an average terraced house and £13,358 from a semi-detached home.

Gateshead

Investors in Gateshead, in the North East of England, received similar yields at an average of 8.3pc last year. 

An average 25pc deposit and stamp duty charges on a typical flat in the area costs £25,220  – so there is potential to build a portfolio of buy-to-lets for serious investors. 

An average flat in Gateshead yields 9.3pc with gross rental income of £8,419. Upfront deposit and tax costs rise to £39,540 for a terraced house – priced at an average of £141,210 – and £46,660 on a semi-detached property – with a typical price tag of £166,630. Houses in Gateshead yield an average of 7.9pc.

This article was first published on April 27 2023 and has since been updated.