Soaring rents have enticed property investors back to the buy-to-let market to take advantage of the demand.
Asking rents outside London were up 11pc year-on-year in the first three months of 2022, according to property website Rightmove. In the capital, they jumped by 14.3pc – the largest annual increase recorded in any region since its records began.
A dire shortage of homes to let means rental bidding wars are commonplace and a record number of landlords are achieving over asking price.
Buyers must still contend with rising house prices, but a budget of £100,000 is enough to invest in some of the most in-demand cities in the UK.
We previously looked at where landlords could invest with budgets of £25,000 and £50,000, which largely ranged across Wales and the north east of England.
In the three locations below, an initial investment of £100,000 is enough to buy a property with the potential to earn more than £10,000 each year, according to research by estate agency Hamptons.
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Bristol ranked as the best city for landlords to invest in for 2022, according to Aldermore bank.
More than a quarter of the South West city’s population lives in rental accommodation, and a shortage of properties to let has pushed rents skyward. The average rental yield is 6.5pc.
A £100,000 budget would cover a 25pc deposit and stamp duty on the average flat and terraced house in the city– costing £70,180 and £96,870 respectively – with cash to spare.
A flat in Bristol brings in roughly £11,092 of rental income a year, once mortgage payments and a 10pc provision for maintenance costs have been deducted, according to Hamptons. Annual income rises to more than £14,826 for a terraced house, among the highest for this type of property in the country.
An initial lump sum of £100,000 would be enough to cover the deposit on a semi-detached house in the city, at an average of £96,550, but stamp duty would push the total investment to £117,450. Landlords who can stretch their budget to this size could expect annual rental income after expenses of £17,681.
Manchester has enjoyed a similar post-pandemic rental boom to Bristol. Tenants have flooded back to the city and snapped up any available lets, with new-build flats proving particularly popular, according to Rhiannon Durston, of agency Reside.
She said: “The city has become increasingly popular with investors as a result. Landlords are targeting lots of different price points, ranging from those looking to invest their savings in just one property, to those buying multiple.”
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The average rental yield in the city is 6.4pc, and a typical flat costs £175,380. Landlords will need to make an initial investment of £50,120 to cover the deposit and tax bill, and can expect profit after expenses of £7,885 a year.
Investing in terraced houses and semi-detached homes in the city is also possible with a £100,000 budget. An initial stake of £55,520 for a terraced home and £74,390 for a semi are needed to cover the deposit and tax bill on each of these property types.
Landlords can make profits after expenses of £8,694 from a terraced house and £11,496 from a semi-detached house, according to Hamptons.
Ms Durston added: “Many of the new build sites are now sold out. One-bedroom rentals fly out and three-bedroom homes are very popular too, but there are few of these available on the market.
“Splitting bills three ways between tenants makes the let more affordable, which is why they are in such high demand.”
Higher property prices in the sought-after hotspot of Winchester limits landlords with a £100,000 budget to investing only in flats. They require £68,550 to cover the average deposit and stamp duty.
Buyer appetite for houses with gardens has surged since the pandemic, meaning landlords will be up against stiff competition for bigger properties. The average terraced house in the area requires an initial investment of £115,080.
However, investors who can afford to tap into the Winchester market will benefit from strong tenant demand.
Bill Jarvis, of estate agency Winkworth, said: “Landlords are now in a position to choose who they let their property to because demand is so high, whereas they couldn’t before.
“We frequently see tenants offering on a property without even viewing it.”
The average rental income from a flat in Winchester is £10,332 a year, after costs, according to Hamptons. If landlords can stretch their budget to a terraced or semi-detached house, annual rental income rises to £16,535 and £19,509 respectively.
“A lot of tenants are willing to pay guide price and above to secure a property, but especially so if they have pets,” added Mr Jarvis.
“There is a real lack of landlords who are willing to allow animals in their rentals, so tenants are offering higher bids to persuade them otherwise, sometimes to the tune of hundreds of pounds extra each month.”
By Rachel Mortimer
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