Buy-to-lets in high demand areas cost up to 7.7% more on average – but are they worth it in the long run?
The latest market analysis by mortgage experts, Revolution Brokers, has revealed that landlords looking to reduce void periods by investing in a buy-to-let within an area of high rental demand will pay an average of 6.2% more for the pleasure.
Revolution Brokers analysed data on the average price for a buy-to-let investment across the market in England and how this differs between areas with, and without, a high level of rental demand.
The figures show that investing in a high rental demand area will set you back £396,349 on average across England.
This is a 6.2% premium compared to areas of lower rental demand, equating to an additional £23,000 on your initial investment.
It’s the South West where landlords can expect to pay the most in order to reduce the potential of a void period between tenancies. At £345,908, the cost of securing a buy-to-let property in a high rental demand area is 7.7% more compared to those in areas with lower levels of rental demand.
The East of England and North West are also home to some of the highest property price premiums for a high rental demand investment at 7.3%, followed by the South East (6.2%) and London (5.8%).
Even in Yorkshire and the Humber where this premium is at its lowest, it will still cost the average landlord 3.5% more to secure an investment property within an area of high rental demand.
Founding Director of Revolution Brokers, Almas Uddin, commented: “When investing in a buy-to-let the initial cost of your investment is often one of the most influential factors in the decision making process. Not only do you have to be able to fund the purchase itself, but the sum spent upfront has a direct impact on the yield you will be able to return.
“However, the secondary factor is the rent you are able to generate and the consistency at which you are able to secure it. In high demand rental areas, not only will you be able to justify a higher rate of rent, but you will also benefit from a far lower level of void periods.
“Minimising void periods is an incredibly important part of maximising your investment as you can have the best yield in the world, but if you can’t fill the property with a paying tenant it doesn’t count for much.
“So when looking to invest, landlords should always do so with a long-term view of a property, not just how much it costs, but what they can expect as a return and how easily can they rent it in the first place.
“With this in mind, paying a premium to secure a home in a high rental demand area may come at an initially higher cost, but it can pay dividends further down the line.”