Should a Southampton Landlord buy a 1 or 2 bed apartment?

Last week, I spoke to one of my landlords and she asked me if the number of bedrooms in a property had any relationship to the return she could get. I did some research and followed up her query – I was actually quite surprised with the results...

Currently in Southampton, the average rent for a one bedroom apartment is around £563 per month with an average property value of £109,700. This means an approximate average return/yield of 6.15% per year. There are one bed apartments on the market for rent at a higher price than some two bed apartments. In fact, some one bed apartments in Southampton can attract rents in the mid- late £800's whilst some converted terraced houses with flats in them can be rented for as little as £395 per month. This means yields on one beds can range between 3% and 8%.

Two bed apartments in Southampton can be priced at £300,000+ in one of the modern upmarket developments around Ocean Village and as low as £60,000 in other areas. Again, rents vary greatly, ranging from over £2,000 per month for some bespoke unique penthouse apartments overlooking the Marina in Southampton to £575 per month in the older parts of Southampton. However, looking at the average rent for a two bed apartment in Southampton, I calculate it to be £748 per month with the average value being £159,600 which gives an average return/yield of 5.62% per year.

Whilst there is a little difference in the yields between 1 and 2 bedroomed units, it is only one of many factors you should consider before buying a property. Whilst two bedrooms are more expensive to buy, they appeal to a larger tenant pool. Do they sell better? Well, 45.3% of the two bed apartments on the market in Southampton at this moment in time are sold stc compared to 37.7% of 1 bed apartments – so quite a bit of difference there. Obviously this does not take account of the split between owner/occupied and rental stock.

It really comes down to the property and type of tenant. Two-beds attract sharers, which brings both advantages and disadvantages to the landlord but one beds have better yields. It depends what you want from your investment. I know the lettings market in Southampton so I can advise you what you can expect to achieve in rent, the size of your tenant pool and how to minimise your voids.

If you would like to discuss my thoughts on the rental market, whether you are an existing landlord or looking to invest for the first time, please feel free to call into our offices at 36 London Road, SO15 2AG or contact me on 023 8001 8222 or email brian.linehan@belvoirlettings.com.