Flats and smaller houses make the best buy-to-let investment for landlords, having seen the strongest annual increase in average yield compared with other property types during the past 12 months.

Market analysis by Inventory Base reveals that cooling property values and market-leading rental growth across Britain mean flats provide an average yield of 6.4%, with terraced homes a close second at 6.3%. Semi-detached homes also offer a respectable return on investment (5.3%) while detached properties can only offer 3.9%.

Over the past year, flats were the only property type to experience a drop in the average property value - falling by -0.9% - but have also seen by far the strongest level of growth in average monthly rental value, up by 9.3%.

Average yield

As a result, the average yield offered by a flat has grown by 0.6% in the last year, a stronger rate of increase than terraced (+0.4%), semi-detached (+0.2%) and detached homes (+0.2%).

Sián Hemming-Metcalfe (pictured), operations director at Inventory Base, says flats not only offer buy-to-let investors a generally more affordable entry point for their initial investment, but also benefit from a rental market that sees higher tenant demand and, consequently, stronger rental price growth.

“While the capital appreciation may not match that of other property types, flats come with a host of advantages for investors, including lower running costs and a smoother process when it comes to renting and managing the property,” she explains.

Hemming-Metcalfe adds that efficiency is crucial for managing the bottom line, which is where detailed and accurate property reports become indispensable as they document and maintain all aspects of the property, significantly reducing the risk of disputes and costly repairs.