Students and young singles top rental yields league table
Renting to students and young singles could be the best way for landlords to get a return on their UK property investment, a new study suggests.
Data from buy-to-let mortgage provider Paragon shows that students are the most lucrative demographic to rent out a property to based on annual rental yields.
Using independent research by BDRC Continental, the lender found that students generated an average yield of 6.45 per cent as a proportion of the property's value.
They were closely followed by young singles, who provide an average yield of 6.22 per cent.
However, there could be a downside to renting to students, with some costs likely to be greater than with other tenants.
"Student yields typically outperform the wider market because they are let on a per room basis, which can generate higher rental income," commented Nigel Terrington, Paragon Group chief executive.
"On the downside, they tend to require a higher degree of maintenance, so landlords have to factor that cost into their overall business models."
Retired people (6.16 per cent) and professional workers (6.13 per cent) were also found to be potentially valuable tenants.
At the other end of the scale, non-housing allowance benefit claimants generate the lowest yields at 5.78 per cent, followed by young couples and manual workers 5.94 per cent.
But while rental yield calculations are an important tool for landlords when considering investments, Mr Terrington advised that other considerations also need to be taken into account.
"Yields are an important component of a landlord's overall business plan because they give a good indication of the income that the property generates," he said.
"Of course, returns for many landlords will often be higher than stated yields as these are calculated at the current rental income against the property's value today, not taking into account capital appreciation since the landlord purchased the property or their loan-to-value."
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