Yesterday I had a chat with one of my landlords and he was asking whether the number of beds a property had has any relationship to the kind of return that could be expected. An interesting question!
Currently in Muswell Hill a 1 bed property on average costs £448,400 and rents for around £1000 pcm. This means an approximate average return/yield of 2.68%. There are 1 bed flats on the market for around £1400pcm which means yields can range between 2.68% and up to 3.75%. Two bed flats can be priced as low as a 1 bed (£450,000) and as high as £995,000 in Muswell Hills new luxury development at 77 Muswell Hill. Again rents vary hugely ranging from £2730 pcm to as low as £1250pcm. The average purchase value of 2 beds being in the region of £525,000 and the average rent being around £1500, giving an average yield of 3.43%.
Whilst there is little difference in the yields of one and two bed properties there are many factors to consider before buying a property. Two bedroomed properties may be more expensive to buy but they do appeal to a much larger tenant pool. Do they sell better? Thirty two percent of properties currently sold subject to contract in N10 are 2 beds and eleven percent are one bedroom - so quite a big difference there. But that of course, does not take into account the split between owner/occupied and rental stock.
It really comes down to the type of tenant. Two beds attract sharers which has both advantages and disadvantages and one beds have better yields. It depends what you want. If you’d like advice on what you can expect to achieve in rent, the size of your tenant pool and how to minimise your voids get in touch.