Where’s best for buy-to-let? Nottingham takes the top spot

Buy-to-let might not seem as attractive as it once was but there are still areas of the country where investors can find good returns.

New research by Totally Money confirms that university towns and cities offer some of the highest yields, making them potentially the most lucrative hotspots for landlords.

Nottingham in particular stands out, with two postcodes featuring in the top five table for rental yields. 

The ten best places for buy-to-let rental returns, according to the Totally Money report

The ten best places for buy-to-let rental returns, according to the Totally Money report

The ten best places for buy-to-let rental returns, according to the Totally Money report

Postcode area NG1 takes first place with an average rental yield of 11.99 per cent, with Nottingham’s NG7 taking fifth place with an average yield of 8.89 per cent.

Property prices are also affordable in the city, averaging £152,631 and £160,269 respectively — far below the UK average of £226,906. Plus, it has a student population of over 37,000.

Liverpool takes second place, with two postcodes in the top five, and five postcodes in the top 20. It has around 70,000 students, as well as three universities. 

You can find our buy-to-let spotlight on Liverpool by clicking here.  

Newcastle’s NE6 takes sixth place, with an average rental yield of 8.43 per cent. Property prices here are far below the UK average at £118,789.


Data is based on an analysis of properties on Zoopla. Research produced by TotallyMoney.

Similarly, Newcastle’s NE1 has yields of 8.16 per cent, and is within walking distance of both Newcastle and Northumbria universities. Property prices are slightly higher at £161,035, but are still below the UK average.

Totally Money’s Mark Moloney said: ‘Year after year, there’s a constant flux of students looking for somewhere to bed down for the night, so it’s no surprise that university cities offer landlords the highest buy-to-let yields. 

‘Demand is high, and landlords may use this as an opportunity to drum up competition between tenants and push rental yields higher.’

London, meanwhile, struggled to perform well compared with other towns and cities in the country.

Which cities are offering the highest returns on buy-to-let investments? 
Rank Postcode Postcode Town Properties for Rent Average Monthly Rental Value Properties for Sale Average Asking Price Yield
1 NG1 Nottingham 44 £1,525 169 £152,631 11.99%
2 L7 Liverpool 149 £941 79 £115,398 9.79%
3 TS1 Cleveland 185 £543 96 £68,925 9.45%
4 L1 Liverpool 116 923 404 £118,754 9.33%
5 NG7 Nottingham 240 £1,187 168 £160,269 8.89%
6 NE6 North East 540 £834 216 £118,789 8.43%
7 NE1 North East 357 £1,095 157 £161,035 8.16%
8 S2 Sheffield 238 £853 117 £125,483 8.16%
9 SS1 Southend-on-Sea 100 £2,736 207 £409,233 8.02%
10 BD1 Bradford 153 £439 130 £65,889 8.00%
11 L6 Liverpool 181 £765 123 £116,995 7.85%
12 TS3 Cleveland 38 £431 75 £67,489 7.66%
13 L5 Liverpool 48 £668 122 £104,893 7.64%
14 SR1 Sunderland 117 £567 47 £90,347 7.53%
15 HD1 Huddersfield 171 £838 61 £134,246 7.49%
16 L3 Liverpool 208 £836 817 £134,803 7.44%
17 LS6 Leeds 799 £1,483 79 £239,505 7.43%
18 M14 Manchester 433 £1,265 95 £214,848 7.07%
19 DN31 Doncaster 39 £398 51 £68,301 6.99%
20 PR1 Preston 653 £845 606 £147,076 6.89%
Source: Totally Money           

North London in particular was a poor performer, with five postcodes in the bottom 10 yields. Highgate in N6 was the worst performing postcode in the capital and third from bottom overall, with paltry yields of just 1.93 per cent.

Landlords whose hearts are set on the capital need to head east for the best return on investment.

E6 in East Ham offers the best London yields at 4.81 per cent, with Stratford, Plaistow, Poplar, and Chingford all ranking in the London top 10.

Income per property in London
Local Authority Average annual property
income per landlord
Kensington and Chelsea £34,000
Westminster £33,000
City of London £32,000
Camden £28,000
Barnet £25,000
Hackney £24,000
Epping Forest £23,000
Hammersmith and Fulham £23,000
Islington £22,000
Brent £21,000
Enfield £21,000
Redbridge £21,000
Elmbridge £20,000
South Bucks £20,000
Wandsworth £19,000
Harrow £19,000
Hertsmere £19,000
Hounslow £19,000
Lambeth £19,000
Runnymede £19,000
Total London £20,000
Total UK £14,000

Despite this, private landlords living in the capital saw a total of £7billion in revenue in 2017/18, 20 per cent of the total for landlords across the UK, according to estate agents Ludlowthompson.

Out of the top 20 UK areas with the highest average amount of annual property income per capita 16 were in London. 

Private landlords in Hackney, for example, made on average £24,000 in the last year from property.

But high house prices in the capital have squeezed rental yields, meaning landlords in the capital have to make their property work harder to turn a profit.

What’s happening with buy-to-let mortgage rates? 

Lenders are continuing to slash their buy-to-let mortgage rates in an attempt to lure in new business as tax changes continue to force landlords out of the market.

Average rates in the buy-to-let sector have dropped significantly since 2015 – indicating how keen lenders are to get new business onto their books as demand falls.

Virgin Money has a five-year fixed-rate mortgage at 60 per cent loan-to-value at 2.13 per cent interest and a £1,995 product fee, while Royal Bank of Scotland has a five year fix at 60 per cent LTV with no fee at 2.30 per cent. 

For longer term mortgages, Coventry has a 10-year fix at 2.85 per cent interest at 50 per cent loan-to-value with a £1,999 fee, while The Mortgage Works has a 10-year fix at 75 per cent LTV at 4.99 per cent with no fee. 

University cities offer some of the highest yields, making them more lucrative for landlords

University cities offer some of the highest yields, making them more lucrative for landlords

University cities offer some of the highest yields, making them more lucrative for landlords

On top of low rates, borrowers can take advantage of an increasing number of cashback incentives as lenders get creative to attract new business.

Darren Cook, finance expert at Moneyfacts.co.uk, said: ‘An incentive of cashback to assist landlords in covering the costs of a buy-to-let mortgage is becoming a more prominent feature of the buy-to-let market. 

‘Especially considering last year’s upheaval in this sector, landlords will be looking for any way to cut costs and increase their margins. It seems that providers are obliging.’

The current number of deals with a cashback incentive stands at 444, which is nearly double the number of products that were available two years ago.

Some 266 of these deals are available at the higher loan-to-value tiers of 70 per cent, 75 per cent and 80 per cent, which could make them particularly appealing to first-time landlords.

More lenders are offering cashback incentives with buy-to-let mortgages
  Nov-11 Nov-16 Nov-17 May-18 Today 
Number of deals with a cashback incentive  93 213 291 339 444
Proportion of all products with a cashback incentive 22% 15% 16% 17% 19% 
Source: Moneyfacts           

‘Borrowers will need to compare mortgages by taking all their features into account, rather than focusing solely on the incentive package, rate or fees,’ added Cook.  

Click here to search for buy-to-let deals using our mortgage finder. You can also use our new and improved mortgage calculator to find the true costs of any mortgage deal.

Tips for letting to students 

Aim for a property which has at least three bedrooms. Students tend to rent in groups of three to five people. Having more than one bathroom will also be a big selling point. 

Location-wise, look for properties with good access to the university campus as well as basic shops and services.

It’s a good idea to ask for a guarantor for each student tenant. That way, even if the student doesn’t pay the rent, you can recover it from the guarantor. 

Some universities, like the University of Southampton, compile directories of accredited private student accommodation in the area. You will need to comply with certain standards in order to get onto these directories, but they are a great way of directly reaching suitable tenants.

Source: LendInvest 

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