With savers receiving poor returns from banks and building societies, thousands of people unsurprisingly continue to turn to residential property as a means of supplementing their income, supported by low mortgage borrowing rates, solid demand from tenants and stable yields, as buy-to-let consolidates itself as the investment of choice.
Despite a challenging few years for the buy-to-let market, characterised by tax and regulatory changes, investment in buy-to-let continues to outperform most major asset classes, as Britain’s rented sector continues to expand, with a sixth of the population – some 10 million people – now living in accommodation rented from private landlords.
New research from CIA Landlord looked at the best cities to become a landlord based on the average property price, mortgage amount, average rent from tenants, and the monthly costs of being a landlord to calculate monthly profit.
Whilst Brighton took the title of the best city to become a landlord for the last few years, it has been revealed that in 2022 London is the most profitable city to become a landlord. Here, landlords can expect to make an average monthly profit of £996.76. Newry, Bangor, and Brighton follow with £746.51, £603.01, and £544.76 average profit per month respectively.
Top 10 places to become a landlord based on average property price, mortgage amount, average rent, and monthly costs vs profits:
| Rank | City | Average Property Price | Mortgage Amount | Monthly Mortgage Amount | Total fees | Total Monthly Profit |
| 1 | London | £700,325.00 | £501,899.58 | £2,433.00 | £9,429.72 | £996.76 |
| 2 | Newry | £141,417.00 | £101,348.85 | £491.00 | £2,059.18 | £746.51 |
| 3 | Bangor | £178,561.00 | £127,968.72 | £620.00 | £2,524.44 | £603.01 |
| 4 | Brighton | £462,871.00 | £331,724.22 | £1,608.00 | £6,247.34 | £544.76 |
| 5 | Portsmouth | £260,596.00 | £186,760.47 | £905.00 | £3,596.23 | £533.76 |
| 6 | Leeds | £254,464.00 | £182,365.87 | £884.00 | £3,515.64 | £531.76 |
| 7 | Nottingham | £245,874.00 | £176,209.70 | £854.00 | £3,399.75 | £510.76 |
| 8 | Manchester | £235,337.00 | £168,658.18 | £817.00 | £3,247.76 | £423.76 |
| 9 | Salford | £214,635.00 | £153,821.75 | £746.00 | £2,975.96 | £418.76 |
| 10 | Armagh | £102,339.00 | £73,342.95 | £355.00 | £1,491.47 | £397.51 |
St Albans has been identified as the worst place to become a landlord.
The table below shows the worst cities to become a landlord in 2022:
| Rank | City | Average Property Price | Mortgage Amount | Monthly Mortgage Amount | Total fees | Total Monthly Profit |
| 1 | St Albans | £609,712.00 | £436,960.27 | £2,118.00 | £7,960.33 | -£769.24 |
| 2 | St Davids | £353,750.00 | £253,520.83 | £1,229.00 | £4,626.61 | -£599.74 |
| 3 | Salisbury | £385,343.00 | £276,162.48 | £1,339.00 | £5,057.89 | -£543.24 |
| 4 | Wells | £361,633.00 | £259,170.32 | £1,256.00 | £4,760.84 | -£458.24 |
| 5 | St Asaph | £222,585.00 | £159,519.25 | £773.00 | £2,931.78 | -£454.99 |
| 6 | Worcester | £300,811.00 | £215,581.22 | £1,045.00 | £3,970.19 | -£421.24 |
| 7 | Ely | £328,224.00 | £235,227.20 | £1,140.00 | £4,329.68 | -£418.24 |
| 8 | Truro | £367,255.00 | £263,199.42 | £1,276.00 | £4,851.35 | -£353.24 |
| 9 | Chichester | £462,292.00 | £331,309.27 | £1,606.00 | £6,100.71 | -£324.24 |
| 10 | Lichfield | £349,007.00 | £250,121.68 | £1,212.00 | £4,617.69 | -£319.24 |
The study also uncovers the true impact the Covid-19 pandemic has had on the capital’s housing market, identifying that the majority of London boroughs are unprofitable. The research reveals that London’s profitability for landlords has increased slightly since January 2021 when just six out of 33 boroughs were profitable.
Rising property prices and decreasing rental rates are squeezing profit margins for landlords, leaving 25 out of 33 London boroughs unprofitable in 2022, although this is a slight rise from the ranking last year which showed that just six boroughs were profitable.
The table below shows the most profitable London boroughs to become a landlord in 2022:
| Rank | Borough | Average Property Price | Mortgage Amount | Total Fees | Monthly Mortgage Amount | Total Monthly Profit |
| 1 | Westminster | £1,093,779.00 | £783,874.95 | £13,886.30 | £3,799.00 | £2,651.76 |
| 2 | Southwark | £715,005.00 | £512,420.25 | £9,135.84 | £2,484.00 | £1,603.76 |
| 3 | Lambeth | £685,914.00 | £491,571.70 | £8,770.99 | £2,383.00 | £471.76 |
| 4 | Hammersmith | £992,008.00 | £710,939.07 | £12,609.92 | £3,446.00 | £285.76 |
| 5 | Newham | £388,973.00 | £278,763.98 | £5,046.85 | £1,351.00 | £154.76 |
| 6 | Tower Hamlets | £549,139.00 | £393,549.62 | £7,055.60 | £1,907.00 | £144.76 |
| 7 | Brent | £613,301.00 | £439,532.38 | £7,860.30 | £2,130.00 | £107.76 |
| 8 | Barking | £370,528.00 | £265,545.07 | £4,815.52 | £1,287.00 | £36.76 |
| 9 | Enfield | £464,308.00 | £332,754.07 | £5,991.68 | £1,613.00 | -£31.24 |
| 10 | Kingston upon Thames | £764,617.00 | £547,975.52 | £9,758.06 | £2,656.00 | -£31.24 |
Westminster was identified as the most profitable London borough with an average profit of £2,651.76 per month, followed by Southwark with £1,603.76 and Lambeth making an average of £471.76.
Whilst Westminster comes out on top as the most profitable London borough in 2022, it’s also where landlords pay the highest amount of fees at £13,886.30 per annum. Hammersmith, whilst not nearly as profitable, is the second most expensive in terms of fees as landlords can expect to pay £12,609.92 annually with an average profit of just £285.76.
Take a look at the table below revealing the boroughs that have seen the biggest shift in profit for landlords in 2022:
| Rank | Borough | Total Monthly Profit 2021 | Total Monthly Profit 2022 | Difference in profit |
| 1 | Kingston upon Thames | -£575.83 | -£31.24 | +£2,548.17 |
| 2 | Westminster | £164.15 | £2,651.76 | +£2,487.61 |
| 3 | Southwark | £114.18 | £1,603.76 | +£1,489.58 |
| 4 | Hammersmith | -£606.54 | £285.76 | +£892.30 |
| 5 | Lambeth | -£348.21 | £471.76 | +£819.97 |
| 6 | Islington | -£834.90 | -£211.24 | +£613.66 |
| 7 | Wandsworth | -£606.28 | -£133.24 | +£473.04 |
| 8 | Barnet | -£333.90 | -£782.24 | -£448.34 |
| 9 | Camden | -£369.83 | -£2,557.24 | -£2,187.41 |
| 10 | Kensington and Chelsea | -£2,271.19 | -£5,955.24 | -£3,684.05 |
Kensington and Chelsea, Camden, and Ealing were identified as the least profitable cities to become a landlord with average losses of £5,955.24, £2,557.24, and £864.24 respectively.
It is important when considering becoming a landlord to identify locations where long-term profit is achievable as mortgage costs, monthly fees, and rent charges may find you at a loss in profit per month.
The table below shows the worst London boroughs to become a landlord in 2022:
| Rank | Borough | Average Property Price | Mortgage Amount | Total Fees** | Monthly Mortgage Amount | Total Monthly Profit 2022 |
| 1 | Kensington and Chelsea | £2,224,144.00 | £1,593,969.87 | £28,062.96 | £7,726.00 | -£5,955.24 |
| 2 | Camden | £1,246,090.00 | £893,031.17 | £15,796.53 | £4,328.00 | -£2,557.24 |
| 3 | Ealing | £791,778.00 | £567,440.90 | £10,098.70 | £2,750.00 | -£864.24 |
| 4 | Haringey | £707,242.00 | £506,856.77 | £9,038.48 | £2,457.00 | -£820.24 |
| 5 | Richmond upon Thames | £938,322.00 | £672,464.10 | £11,936.61 | £3,259.00 | -£792.24 |
| 6 | Barnet | £690,729.00 | £495,022.45 | £8,831.38 | £2,399.00 | -£782.24 |
| 7 | Bromley | £562,986.00 | £403,473.30 | £7,229.27 | £1,956.00 | -£701.24 |
| 8 | Lewisham | £528,615.00 | £378,840.75 | £6,798.20 | £1,836.00 | -£546.24 |
| 9 | Merton | £665,520.00 | £476,956.00 | £8,515.21 | £2,312.00 | -£499.24 |
| 10 | Greenwich | £631,811.00 | £452,797.88 | £8,092.45 | £2,195.00 | -£462.24 |
As part of the cost of being a landlord, there are fixed fees that you must adhere to. It is important to make note of these and keep an eye on when they need to be renewed.
| Required Fees | Frequency | Annual Cost (£) |
| Tenancy Deposit Registration | Every new tenant | £40.00 |
| Landlord Insurance | Yearly | £170.00 |
| Energy Performance Certificate | 10 Years | £77.50 |
| Gas Safety Certificate | Yearly | £99.00 |
| National Insurance | Yearly | £158.60 |
| Landlord Licence Fee | 5 Years | £47.50 |
| Total Annual Cost (£) | £592.60 |
One area that can cause setbacks to landlords’ income is the cost of maintenance repairs and replacements. Whether it’s supplying a toaster for a new tenant or replacing an entire dishwasher, these costs soon add up.
The study revealed that the total cost of buying all household appliances, (dishwasher, fan oven, tumble dryer, fridge, washing machine, and boiler) comes to a hefty £3.732.00, with an average annual replacement cost of £38.82.
The table below shows the costs of appliances to take into account:
| Big Appliance Replacements | Cost To Buy or Replace (£) (including installation) | Frequency of replacement (Years) | Annual Cost (£) | Monthly Cost (£) |
| Dishwasher | £620.00 | 10 | £62.00 | £5.17 |
| Electric Fan Oven | £232.00 | 12.5 | £18.56 | £1.55 |
| Tumble Dryer | £577.00 | 10 | £57.70 | £4.81 |
| Fridge | £391.00 | 15 | £26.07 | £2.17 |
| Washing Machine | £412.00 | 10 | £41.20 | £3.43 |
| Boiler | £1,500.00 | 15 | £100.00 | £8.33 |
| Total | £3,732.00 | 12.08 | £51.48 | £4.29 |
The table below shows the costs of furnishing:
| Furnishing Fees | Cost To Buy or Replace | Frequency of replacement (Years) | Average Annual Cost for Furniture | Average Monthly Cost For Furniture |
| Double Bed | £208.00 | 8 | £26.00 | £2.17 |
| Sofa | £489.00 | 11 | £44.45 | £3.70 |
| Wardrobe | £314.00 | 15 | £20.93 | £1.74 |
| Drawers | £157.00 | 15 | £10.47 | £0.87 |
| Double Bed Mattress | £315.84 | 8 | £39.48 | £3.29 |
| Total Cost for Furniture | £1,483.84 | 11.4 | £130.16 | £10.85 |
Richard Wayman, finance director at CIA Landlord Insurance, commented: “Covid-19 has undoubtedly shifted the way new landlords will be looking to invest in 2022, and our ranking makes it clear that considering location alongside price has never been more crucial.
“When looking into the true costs of being a landlord this year, it can certainly come as a surprise to some at just how expensive certain requirements are as well as the fluctuation in these costs.
“Before taking your first step into the property ladder, we recommend you consider all the costs involved in becoming a landlord and ensure you invest in an area that is stable and will be profitable for you in the long term.”
Methodology
In order to calculate the best city to become a landlord, CIA Landlord Insurance analysed every cost from maintenance and furnishing to letting agent fees, safety certificates, national insurance, licencing fees, tenancy deposit registration, and landlord insurance costs. This was combined with the average mortgage amount, rental rates, and property prices across 69 UK cities and 33 London boroughs to determine what were the best areas to become a landlord in 2022.
The monthly profit total has been calculated by taking the sum of the average rent, minus the monthly mortgage and monthly fees.
The total fees for landlords include arrangement, letting agent and monthly additional fees
Annual landlord licence fee cost is taken from an average of England, Wales, Scotland and Ireland.
Interesting article. It does assume that the investor has no capital constraints. The Newly yield on the deposit is around 20%, but London is 5%. I’d personally be looking more at yield or IRR, not profit ££.
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