Buy to let homes that need no refurbishment are the best property investments, according to new research.
Landlords purchasing a buy to let home in tip-top condition ready for tenants to move in spend £58,000 more than landlords buying homes for renovation.
But the investment return is 1% higher than buy to let homes that have undergone a refurbishment.
The average cost of a two-bed buy to let home ready for tenants is £194,599 – 43% more than the £136,042 investors pay for a property needing renovation.
However, the study by HSBC shows the yield is nearly 20% higher – at 5.4% compared with 4.4% for a refurbished buy to let property.
The study also showed a two-bed flat that needs no refurbishment is the most popular buy to let investment – taking a 24% share of the market.
Two-thirds of landlords prefer these properties, while 38% opt for cheaper homes that need work before letting.
The report also revealed buy to let homes needing no work give higher yields in 60% of UK cities – two notable exceptions are Liverpool and Edinburgh.
Average rent for turnkey two-bed buy to lets is £827 a month – 75% higher than the average rent for a refurbished home that attracts a rent of just under £500 a month, which says the bank, accounts for the improved yields.
In Leeds, a two bed home needing no work achieves a £675 average monthly rent, compared with just £327 for refurbished homes.
The figures reverse in London, where renovated property can let for as much as £1,871 a month in some neighbourhoods in the capital.
Peter Dockar, head of mortgages at HSBC, said: “Ready-to-move-into properties are often the savvier choice for landlords looking to purchase additional BTL properties. Not only does this avoid the need for lengthy and expensive renovations, it can also result in higher yields in most areas of the country.
“While the initial purchase price will be significantly higher, rental returns are also improved, making monthly mortgage and maintenance costs more palatable.”