There is still plenty of money to be made in buy-to-let, provided you invest in the right areas, according to new research. 

Fresh analysis by Direct Line for Business reveals the UK’s property hotspots for investment landlords, and has identified Burnley as the number one place for buy-to-let in today’s market, based on rental yields. 

According to the landlord insurer, landlords acquiring an investment property in Burnley can expect to receive an annualised rental yield of 7.1% on average - the highest in the country, and almost double the average yield in the UK, which currently stands at 3.6%. 

Burnley is followed by Glasgow (6.9%) and Belfast (6.4%) in the top three. 

Areas with the highest rental yield in each UK region (2015-17)

Source:  Direct line for Business, 2018

High house prices in London mean that rental yields in the capital stand at just 4.4% on average, despite the average annual rent clocking in at more than £20,000.

On a wider regional level, Northern Ireland offers the best return on investment for landlords at 5.6%, followed by Scotland at 5.3% and the North East at 5%. 

Across the UK, house price inflation has significantly outstripped increases in rental values, with Direct Line for Business reporting that the average annual rent has increased by 4.7% over the last three years, growing from £7,392 in 2015 to £7,739 in 2017, an increase of £116 per year or £10 per month. 

Over the same period, average house prices have risen by almost £32,000, increasing from £191,855 in 2014 to £223,807 in 2017 – a rise of 17%. 

Areas with the highest rental yield in each UK region (2015-17)

Source:  Direct line for Business, 2018

Christina Dimitrov, business manager at Direct Line for Business, commented: “While the UK’s homeowners can look back at strong gains in the period between 2014 and 2017 where average property price was 17%, it’s a different story for the rental market where average rents across the country rose by 4.7% during this period, which remains below the average salary increase of 5.3%.

“As the number of renters across the UK increases, so too has the number of private landlords, with more than five million privately-let properties currently in the UK.

“With this increased competition, it is more important than ever that landlords are able to offer their tenants well maintained and fully insured properties that will provide best return on their investment in the future.”