In an environment of rising tax bills, increasing running costs and greater administration fees, its clear buy-to-let investors need to do a lot more nowadays to generate any sort of decent returns.
Fortunately then, TotallyMoney has cropped up to reveal the best places landlords can expect to generate sumptuous profits. The bulk of landlords own and operate their buy-to-let properties in locations close to their own personal homes, and this makes sense. Though if the credit scoring experts data is to be believed, then it could be time for investors to start thinking outside the box.
Look North
So what does TotallyMoney have to say? Well, in what it describes as being a strong buy-to-let market, the firm says many of the best-performing postcodes in the UK boast a yield of between 7% and 8%.
The report took a look at 478,486 properties that were either up for sale or ready to rent across the length and breadth of the country. What it showed was that those investing in the north of England or Scotland could expect the best returns on their cash. Sitting at the top of the tree is Liverpool, where landlords can expect to generate a yield of around 10%. Furthermore, 16 of the 25 top-paying postcodes in Britain are located either in the north-west or north of Hadrians Wall.
The UKs best-yielding postcodes
| Rank | Postcode | Postcode Town | MedianRental Value | Median AskingPrice | Yield |
| 1 | L1 | Liverpool | 750 | 90,000 | 10.00% |
| 2 | FK3 | Falkirk | 495 | 62,450 | 9.51% |
| 3 | G52 | Glasgow | 595 | 82,000 | 8.71% |
| 4 | L11 | Liverpool | 650 | 90,000 | 8.67% |
| 5 | TS1 | Cleveland | 425 | 60,000 | 8.50% |
| 6 | KA1 | Kilmarnock | 450 | 64,995 | 8.31% |
| 7 | L6 | Liverpool | 575 | 85,000 | 8.12% |
| 8 | LE1 | Leicester | 667 | 100,000 | 8.00% |
| 9 | LS2 | Leeds | 825 | 125,000 | 7.92% |
| 10 | S1 | Sheffield | 750 | 115,000 | 7.83% |
By comparison, landlords in and around London and the commuter belt can expect to generate much worse returns. According to the research, the AL5 postcode in St Albans boasts the worst average yield, of 1.95%, while the worst-paying bottom 10 pay something in or around just 2%.
The UKs worst-yielding postcodes
| Rank | Postcode | Postcode Town | MedianRental Value | Median AskingPrice | Yield |
| 1 | WC1X | London | 2,825 | 1,484,408 | 2.28% |
| 2 | RG10 | Reading | 1,100 | 585,000 | 2.26% |
| 3 | GU10 | Guilford | 1,295 | 699,950 | 2.22% |
| 4 | KT7 | Kingston upon Thames | 1,350 | 737,475 | 2.20% |
| 5 | S7 | Sheffield | 638 | 350,000 | 2.19% |
| 6 | B73 | Birmingham | 680 | 375,000 | 2.18% |
| 7 | W8 | London | 3,356 | 1,962,500 | 2.05% |
| 8 | GL6 | Gloucester | 795 | 470,000 | 2.03% |
| 9 | IP13 | Ipswich | 650 | 397,500 | 1.96% |
| 10 | AL5 | St Albans | 1,300 | 800,000 | 1.95% |
The better route to 10% returns
When calculating the average yield, TotallyMoney took the average annual rent and divided it by the average asking price. But clearly, this doesnt factor in the multitude of suffocating costs that can considerably diminish actual profits.
As the credit giant notes: Continued changes in tax relief and greater landlord responsibilities are two factors that may have you wondering if residential investment properties are worth it. And boy those costs can really mount up.
Its not just a case of investors having to pay larger and larger sums to the taxman, whether it be a result of bigger stamp duty bills, the loss of tax relief, or larger capital gains tax bills when selling your rental property. Legislative changes also mean heftier administration costs, such as those introduced under the recent Tenant Fees Act, or bigger safety and maintenance fees, as per new laws governing day-to-day buy-to-let operation.
Those 10% yields in Liverpool look mighty tempting, sure, but clearly they might not make landlords the sort of money theyd be hoping for.
Id much rather put my money to work in the stock market. Why? Well, long-term investors could expect to make up to a 10% return and without the immense cost or aggravation that buy-to-let landlords have to deal with. And theres some truly brilliant low-cost dividend shares out there to help you generate a solid income from your investments.
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