High yield property investment
What high yield property investment UK can offer best returns?
- What is a property yield?
- What is a good yield on a rental property?
- Low interest environment
- Retirement property investments
- How good are student property investments UK?
- The fall in the value of the pound – the rise in the number of tourists?
- Property: a stable investment option?
What is a property yield?
When we talk about a property yield, we mean the annual return likely to made on a property investment. A rental yield is calculated by taking the annual rental income and dividing it by the property value, and then multiplying by 100. This will give a gross yield percentage. To get a net yield percentage, factor in fees such as ground rent or a service charge.
What is a good yield on a rental property?
Typically, buy-to-let investments offer lower rental yields compared to commercial properties. This is due to a number of factors including the property price and tenancy type. There is a possibility to regularly review rental prices with property tailored towards short-term tenants, and property rented as serviced accommodation is typically more expensive than a regular residential property.
For investors who are looking to invest in buy-to-let property, a yield of around 5-8% is considered good. To find out where these rental yields are still possible for residential property, read our UK property hotspots guide.
Low interest environment allows landlords to take our mortgages and still attain good rental yields
In July, gross mortgage lending in Britain was up 9% year-on-year according to UK Finance. The number of approvals has also increased from 75,105 in June to 77,786 in July. Mortgage interest rates have also been slashed to entice the smaller buy-to-let market, with the Post Office being the latest lender to introduce a two-year fixed rate of 1.33pc, its lowest ever according to mortgage comparison site, Moneyfacts. These low interest rates allow investors to achieve a good yield on property investment as the cost of repaying the mortgage is lower and this is offset by rental income.
Older investors may already own their own home outright. According to Census data from 2011, three quarters of those aged 65 and over own their own home, 72% of which are either three bedrooms or more. Some of these owner-occupiers may be looking for retirement income to supplement their pension and ensure a more comfortable life, and may be eager to downsize to a more manageable property. With the additional equity that can be released individuals may consider investing in more property. Bearing that option in mind, what are some high yield investment options?
Retirement property investments – high yielding property in a hands-off environment
Care home investments and later living retirement villages offer high yearly returns of more than 8%, for a guaranteed number of years. These are ideal for overseas investors who cannot afford the time to perform general maintenance tasks associated with more traditional buy to let properties as they are operated by a management company. The process involves the investor buying a room in an operating care home, and then leasing it back to the management company for a monthly return.
Residential care homes can generally achieve slightly higher yields if they accommodate self-funded residents. Sought-after care homes that provide assisted living services such as personal shopping, preapring meals and offering beauty treatments and entertainment are often luxurious, and individuals choose to stay there do so for the social experiences and community feel, not because they require nursing care.
These types of homes are in desirable retirement spots, such as the south west by the coast or the Isle of Wight. These areas are typically attractive to retirees, as they offer a temperate climate, idyllic countryside and a slower pace of life.
How good are student property investments UK?
It is understandable that with Brexit and the fall in the number of EU students applying for places at UK universities, investors perhaps have disregarded student property investments. Student accommodation investments can still generate a good rental yield if a prudent approach is taken and a city is chosen where there is still a significant student population.
Some cities have high percentages of EU students, and the appeal of prestigious universities such as Oxford or Cambridge will not wane, regardless of whether students have to pay higher tuition fees. Likely, this would be at the expense of other universities that are popular with EU students, such as Coventry (8.1% EU students) and Bath, (7.2% EU students) according to a recent report by KPMG. Where can the best UK student accommodation investment be found?.
Investors can instead choose universities with a lower percentage of EU students, such as Sheffield (2.9% EU students). These universities will be less impacted by the fall in EU application numbers, and therefore accommodation in the city will not experience gaps in occupation due to a shortage of students.
Nebula is one such student property investment in S1 Sheffield. It is close to both the University of Sheffield and Sheffield Hallam University. Furthermore, Sheffield’s major attractions, pubs and shopping facilities are just a short walk or tram ride away which allows students to experience the very essence of the city. Each room boasts an en-suite bathroom, and according to Knight Frank, students are persuaded to spend over £160 per week on their accommodation if it offers these sorts of premium features. Units in Nebula can be purchased from £59,950 and the developer is offering a net yield of 9% which is contracted with the developer for three years. This shows that they are so confident that the units will be popular with students.
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The fall in the value of the pound – the rise in the number of tourists?
Perhaps a previously unconsidered benefit of Brexit and the subsequent fall in the value of the pound; Britain is now a more attractive destination for tourists. It isn’t just London that tourists flock to either, Liverpool has a particularly booming tourism industry. Home to The Beatles, Liverpool F.C., Everton F.C., the Albert Dock, Tate Liverpool and a host of other museums. It also has a large port, and thousands of people stop off at Liverpool to explore the city before continuing their onward journey.
Property: a stable investment option?
As we have previously mentioned, banks offer disappointing interest rates that would not serve someone wishing to grow their capital well. Blue chip defensive stocks also offer meagre returns, and some other investment options that offer higher returns carry with them a significant amount of risk such as Land Banking.
Investing in property in the UK has always been a popular option, due to the stability in the market. Despite additional rules and regulations being introduced (such as additional stamp duty charges), it remains a profitable market to invest in.
Investors who have concerns with how stamp duty increase can affect the profitability of their property can consider commercial investments such as student property and retirement home investments. These properties are exempt from stamp duty if the price does not exceed £150,000, making them a great option for people wanting to achieve strong rental yields because their purchase costs are lowwer. Even buy-to-let properties have reduced stamp duty until June 2021. Start searching for properties to invest in, to take advatage of the tax svaings before it is too late.
One Touch experienced investment consultants help individuals to find suitable high yield investment options that will allow them to achieve their financial goals.Contact us to discuss your requirements and available projects today.
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