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Revealed! The buy-to-let places that’ll make your money back the fastest

Tough conditions for buy-to-let investors mean they need all the help they can get to try and make some decent returns. Benham & Reeves is the latest agent to provide some information on the best places to invest and, in my opinion, its research is well worth checking out.

The estate agent calculated the best buy-to-let locations according to the speed at which you can recoup combined property price and stamp duty costs based solely on annual rental return.

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Scotland leads the way

On a country-by-country basis Scotland topped the agency’s list as, according to the study, annual rent rolls here tend to repay stamp duty and the average property cost in just 17.7 years.

Country

Average house price

Stamp duty

Average rent (per year)

Years to recoup investment

Scotland

£149,461

£6,067

£8,786

17.7

Northern Ireland

£134,811

£4,240

£7,344

18.9

England

£243,128

£9,656

£10,128

25.0

Wales

£158,696

£4,760

£6,182

26.4

Scotland also topped the list in terms of the best cities for the fastest returns. Glasgow sits at the summit — a place where investors can expect their cash to be returned to them in a mere 13.3 years — whiet Aberdeen sits in third place.

As for England, Nottingham was the quickest area in England where rental income recoup the total cost initial property investment at 18.4 years.

City

Average house price

Stamp duty

Average rent (per year)

Years to recoup investment

Glasgow

£129,764

£5,190

£10,140

13.3

Belfast

£128,386

£3,919

£8,364

15.8

Aberdeen

£148,236

£5,994

£8,676

17.8

Nottingham

£143,297

£4,664

£8,040

18.4

Newcastle

£153,442

£5,172

£8,556

18.5

Manchester

£178,039

£6,401

£9,888

18.7

Derry City and Strabane

£120,651

£3,619

£6,300

19.7

Leeds

£184,517

£6,725

£9,144

20.9

Edinburgh

£263,868

£13,348

£12,816

21.6

Lisburn and Castlereagh

£160,301

£5,515

£7,608

21.8

Bristol

£274,351

£11,948

£12,888

22.2

Liverpool

£131,276

£4,063

£5,988

22.6

Sheffield

£161,475

£5,573

£7,356

22.7

Birmingham

£186,806

£6,840

£8,520

22.7

Swansea

£146,712

£4,401

£6,624

22.8

Portsmouth

£207,033

£7,851

£9,408

22.8

Southampton

£208,692

£7,934

£9,456

22.9

London

£463,283

£27,062

£20,148

24.3

Leicester

£165,258

£5,762

£7,020

24.4

Cardiff

£207,531

£7,189

£8,796

24.4

Bournemouth

£256,579

£10,526

£10,344

25.8

Oxford

£414,972

£23,197

£16,824

26.0

Plymouth

£176,973

£6,348

£6,936

26.4

Newport

£179,301

£5,379

£6,463

28.6

Cambridge

£436,255

£24,900

£14,688

31.4

So what now?

Benham & Reeves’ analysis makes for interesting reading for those hell-bent on participating in the British buy-to-let sector. For these individuals, it’s clear that investing in Scotland, the north of England, or across the Irish Sea, are the best and most time-effective ways to make their money back.

One important caveat, though. This data only takes into account the initial cost of procuring the property. Nowadays, landlords are facing an increasing financial burden on a day-to-day basis, from reduced tax relief, big regulation-related costs, and more recently a swathe of new admin costs related to the Tenants Fees Act rolled out this month.

Landlord costs are clearly becoming increasingly colossal and, as government struggles to free up homes for first-time buyers, who knows just how bad things will get in the years head?

True value

For this reason, I’ve chosen to invest my money in the stock market, and I’d implore anyone to follow my lead. Some of the shares I hold offer dividend yields north of 10%, investments which have the capacity to return my money much sooner than all of the buy-to-let cities I’ve mentioned above.

I didn’t have to part with hundreds of thousands of pounds to get my investment portfolio off the ground either, another important consideration for those operating on a more modest budget. On a related note, it is worth mentioning that the recent share price washout caused by President Trump’s trade wars and some frankly crummy economic data is leaving many a company looking spectacularly cheap right now.

Take GlaxoSmithKline, BAE Systems and National Grid, for example, just three of the bargains to be had from the FTSE 100. These three mega-caps have what it takes to thrive even in tough times like these, testament to their dominant position in the pharmaceuticals, defence and utilities spaces respectively, yet they can be picked up for very low prices. All three trade on forward earnings multiples below the true value watermark of 15 times, while all carry dividend yields around or above 5%.

So forget about buy-to-let, I say. Stock investing has never been more attractive and is a much better way to use your cash, whatever your investment goals.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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