The £500 pcm rental for a Budget Home would equate to £6,000 per annum. If we divide this £6,000 rental price in 2019 by the purchase price of the property in 2019 (£83,000), we obtain an annual rental yield of 7.23%. This figure is the highest of any type of housing stock and of any city in the UK.
Our sister company, TwentyEA, has found that Liverpool currently not only tops the Premier League in football, but also tops the list of UK cities to operate in for a Landlord.
Whether it is a Budget Home (1), a Family Home (2), or a Lifestyle Home (3) that you are renting out, all three of these categories deliver the best yield for Landlords when compared with any other city in the UK.
The chart below compares the annual rental yields for Liverpool by property type. It suggests that Landlords gain a better return through the rental of cheaper housing stock – i.e. the Budget Homes – than they do by investing in Family Homes (which provide the second-best return) or Lifestyle Homes (which provide the lowest returns).
Readers will note that for comparison, the FTSE – All Share Dividend Yield for 2019 has been added, which represents an alternative investment in the stock market. As you can see, whatever property a Liverpool landlord invested in in 2019, the return was higher in rental yields than the stock market would have provided in dividend yields.
Currently, Liverpool FC have performed on a higher level than any other league club ever this season and it remains to be seen if Jürgen Klopp’s winning ways will continue beyond 2020 and history will recall him as one of the greatest Liverpool managers of all time. After all, he has a big pedigree to live up to.
The only downside for landlord investors in the city is that rental yields (although they are the highest in the UK) are currently falling and on a downward trend. From 2016 to 2019 for example, rental yields in the Budget Homes segment have fallen by 10%.
Which begs the question: “Which city’s rental yields are growing?”, but this will be answered in another article...
1 - Typical Budget Home value has been defined as the value of a home in the 25th percentile – i.e. where 25% of homes that were sold in 2019 are cheaper than this value and 75% of homes are greater than this value.
2 - Typical Family Home value has been defined as the median value of a home sold in 2019 – i.e. the middle value of all homes that were sold in 2019 if ranked in order of price.
3 - Typical Lifestyle Home value has been defined as the value of a home in the 75th percentile – i.e. where 25% of homes that were sold in 2019 are more expensive than this value and 75% of homes are cheaper than this value.