Higher Crime Areas Bring Higher Buy to Let Investment Yields

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New research has shown that areas with higher crime levels can also bring higher buy to let investment yields but can naturally also bring problems for investors.

Research carried out on behalf of lettings platform Howsy found that rental yields actually grow with crime levels as larger urban areas often carry a higher rental price premium but also a higher level of crime.

The research looked at government data on population figures by local authority, the level of crime in these areas, the average house price, rental costs, and the resulting rental yields to see how crime and buy to let profitability correlates.

With greater demand and higher rental prices often found in larger urban hubs, the data shows that the average rental yield actually increases as the level of crime does. 

In the lowest threshold between 0 and 40 crimes per thousand people where there is an average of 34 crimes per thousand of the population, the average rental yield sits at 3.58 per cent.

Between the threshold of 60-80 crimes per thousand people, this increases to 3.77 per cent and in the highest category of 100 or more crimes per thousand people with an average of 123 crimes committed per thousand people, rental yields reach their highest at 4.38 per cent.

But a higher likelihood of crime can cause landlords headaches, whether it be through burglary and damage to their property from an external source or the unlucky instance that their tenant is a criminal and causes this damage themselves or fails to pay the rent. The worst-case scenario is a buy to let property doubling as a drug den, grow house or brothel and this can have a serious impact on the financial income of a landlord.

However, there are certainly exceptions. In the lowest crime category of 0-40 crimes per thousand people, Merthyr Tydfil is home to the highest yields, with an average house price of £102,713 and an average monthly rent of £472, landlords can expect yields of 5.52 per cent with the lowest chance of crime impacting their investment.

Founder and CEO of Howsy, Calum Brannan, commented: ‘Financial gain is understandably the driving factor in any buy to let investment but money isn’t everything and there have been numerous horror stories of rental properties being misused and mistreated for criminal gain or just flat out burgled causing a great deal of damage in the process. 

This is a nightmare scenario for a buy to let landlord and as many don’t live close to their property, it means a lot of time and money spent to rectify the situation. This all eats into the profitability of your investment and can even result in a landlord selling up and exiting the sector altogether.

‘So when looking to invest, it’s smart to consider the additional factors that can impact your property and not just the top line return.’

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