It is a challenging time to be a landlord, with steeper running costs, looming legislation to ban no-fault evictions, and a sluggish rental market.
Yet for those with as little as £25,000 to invest as a deposit, certain areas of the UK still offer inflation-beating rental yields, according to new research.
Recent figures from Zoopla suggest that rental growth has slowed to a three-and-a-half-year low of 3 per cent, down from 7.4 per cent this time last year. The property portal says tenants can no longer absorb the double-digit rental hikes seen in the wake of the pandemic. However, robust rental returns remain possible outside the capital and South East – especially in parts of Wales and northern England, where lower house prices and rising tenant demand keep yields appealing.
Louisa Sedgwick, Managing Director of Mortgages at Paragon Bank, notes that while Houses in Multiple Occupation (HMOs) often deliver the highest returns, they also tend to command higher purchase prices, potentially making them less realistic for those with limited funds. By contrast, smaller terraces and lower-value flats in regions outside major urban hubs can be an ideal fit for a more modest deposit. This strategy is buttressed by new data from Paragon Bank, showing that overall UK rental yields have hit a 13-year high of 7.12 per cent.
Research carried out by Hamptons for Independent Money underscores the potential for double-digit gross yields in various local authorities in northern England and Wales, where a £25,000 deposit can often cover the mandatory 25 per cent down payment plus stamp duty. For instance, the Welsh town of Blaenau Gwent – near Cardiff – boasts an average flat price of £72,780. With monthly rents around £671, landlords could see an 11.1 per cent gross annual yield. Similarly, in County Durham, an average flat is currently priced at £79,750, requiring initial costs of roughly £23,928, and yielding around 10.4 per cent.
Aneisha Beveridge, Head of Research at Hamptons, highlights that properties with lower price tags tend to produce higher yields because the initial outlay is smaller but rents hold relatively steady. “Even with mortgage rates still high, opportunities do exist for those hoping to enter the buy-to-let market or expand their portfolios,” she says. With interest rates on cash savings likely to ease downward further in 2025, she believes buy-to-let could become more compelling for certain investors.
Not all landlords, however, are comfortable investing far from home. Managing a property from a distance can require additional reliance on agents, and certain regions carry heightened risks such as higher crime rates or flood vulnerabilities. Tax changes and upcoming legal restrictions also add complexity. Marc von Grundherr, Director at the estate agent Benham and Reeves, cautions that “investors need to drill down into local data” to weigh up elements such as tenant demand, economic conditions, and planning developments.
For those able to place a bigger deposit, or those with the option to restructure their lending, the range of prospective areas broadens. Yet even a £25,000 stake can open up possibilities in markets where stronger yields and lower acquisition costs help offset broader headwinds. Indeed, according to Sedgwick at Paragon, a leaner approach can often deliver what many landlords still seek: an inflation-busting return, without the need to compete in the crowded, higher-priced segments of southern England.
As with any property venture, careful planning remains essential. Potential investors must ensure their finances, mortgage criteria, and insurance cover are fully in place, particularly if venturing into unfamiliar postcodes or property types. Rigorous due diligence—surveying local rents, factoring in maintenance and vacancies, and keeping abreast of regulatory changes—can all help secure not only a consistent yield, but also peace of mind.
