Which tenants generate the highest rental yields?
New research from the National Landlords Association has found that the tenants generating higher than the average rental yield of 5.6 per cent included migrant workers (6.5 per cent), students (5.9 per cent) and retired people (5.8 per cent).
Meanwhile, the average rental yield on property rented by companies or executives was just 4.9 per cent—the lowest of any tenant type, largely because these properties typically require significant upfront investment to match the high-spec expectations of the tenants.
Executives only accounted for just 2% of tenants. Migrant workers, students and retired people accounted for 7 per cent, 14 per cent and 11 per cent of tenants respectively.
The biggest tenant groups—families with children (52 per cent of all tenants), young couples (48 per cent) and young singles (43 per cent)—offered rental yields that matched, or nearly matched, the overall average.
The NLA also found that the big detached house—the kind of favoured by richer tenants and families—was the least profitable type of property, generating an average rental yield of just 5.4 per cent.
By contrast, the house in multiple occupation (HMO) and the humble bungalow were the most profitable, generating an average rental yield of 6.5 per cent and 6.2 per cent respectively.
Richard Lambert, Chief Executive Officer of the National Landlords Association, said: “The private rented sector has grown because there is an alignment of interests between landlords and tenants.
“There is high demand for rented property from particular groups of people — migrant workers, students, and retirees — and these are precisely the people who offer landlords the best return on their investment.
“They are also the people who will bear the brunt of government policies which end up pushing landlords out of the market.”