Top buy-to-let locations revealed
The research, which was compiled by HSBC, found Blackpool was hot on the heels of Southampton, offering rental yields of 7.81%. Kingston upon Hull took third spot with 7.77%.
The rental yield is calculated as the percentage of the price of the house returned to an investor over a year's rent.
Southampton takes the top spot thanks to a combination of high monthly rents (averaging £901) and relatively low house prices, with the typical property coming in at £138,311.
HSBC says seaside towns, such as Brighton, Bournemouth and Eastbourne, scored highly thanks to holiday rentals and season work. Other cities to score in the top 10 included Liverpool, Slough and Coventry.
London boroughs were mid-table due to the high cost of housing: Southwark was top with an average property price of just over £400,000 and monthly rents of £2,058, creating a typical rental yield of 6.15%.
Above average returns
Peter Dockar, head of mortgages at HSBC, said: "Buy to let remains a good investment for those looking for above average returns, with 23 of the top 50 areas offering yields above 5%, significantly more than is available from more traditional saving options.
"However, it is clear there is a fine line between a property in a desirable area, the rents that can be achieved and the returns that can be yielded so it is key landlords do their research as often the most popular locations may not offer the best return."
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.