When choosing to purchase a buy-to-let investment, you need to take a few factors into account, including the size of the property.
Although it’s true that the more bedrooms you have in your property, the more tenants you can have; it’s doesn’t mean that you will have the best yields with a larger property.
Single Family Properties
If your property is being tenanted by a single family, then two-bedroom properties offer the highest yields, according to recent research by the lettings management platform, Howsy.
The research indicated that the yield per property size, for a single family property, was as follows:
- Two-bedroom properties yielded a 4.8% return
- One-bedroom properties in London yielded a 4.6% return
- Three-bedroom properties yielded a 4.5% return
- Four-bedroom (or more) properties yielded a 3.6% return
Benefits of a Small Property
If your budget is low, then a small property is beneficial as the yields are competitive. The purchase price of a one-bedroom flat or apartment tends to be less than a house, depending on the area.
The other benefit is that the smaller property is often located in popular areas close to transport and amenities that young professionals are seeking in long-term rentals.
Benefits of a Larger Property
If you are looking to significantly increase your return on investment, then a larger property is an option, if it can be converted into an HMO.
Instead of buying a three-bedroom home that is rented to one family, you could consider purchasing a three-bedroom home that can be converted to four, five or even six separate flats.
The initial outlay costs are higher than a single family rental, as you will need funds to convert the property, include communal areas, upgrade amenities to ensure the property complies as an HMO and purchase an HMO licence.
However, the benefits of an HMO property compared to a single family property is not only higher yields, but you reduce your risk of having your entire property vacant. It takes longer to rent a three-bedroom home, compared to a single flat with shared communal areas. This is because each room is rented out under a separate tenancy contract, so if one person moves out, you still receive rent from the other rooms.
Investing in the Right Property
We recommend that if you are thinking about buying a property to let that you first start by getting professional advice, so you can make a considered decision.
At REKA Property Management, we give our clients the facts about the property industry.
If you want to know how to achieve solid rental returns and have peace of mind with your property, then call us on +44 (0) 203 286 6468 or email us at Admin@RekaProperty.co.uk