Derby is the best location for high yields for student buy-to-let landlords, according to Paragon Bank.

The buy-to-let specialist said the city topped its list of top-yielding student rental locations with landlords generating an average yield of 8.67% in student postcodes.

In second place is Pontypridd, home to the University of South Wales, with a yield of 8.31%. Here, the average property price was the lowest in the top 10, as well as the rental income, making it a cheaper option for landlords wishing to purchase property.

Hull was third on the list with yields of 8.12%. Purchasing property in Hull also requires a lower initial outlay, £172,429 on average.

Small is beautiful

Paragon’s research revealed that smaller university towns and cities lead the student rental yield table, as well as locations that are served by just one university.

Eight of the top 10 yielding university towns and cities only have one main university, extending to 14 when taking into account the top 20 yielding locations.

Below are the top 10 locations for student yields:

1. Derby – 8.67%
2. Pontypridd – 8.31%
3. Hull – 8.12%
4. Salford – 8.00%
5. Lincoln – 7.97%
6. Worcester – 7.95%
7. Liverpool – 7.88%
8. Plymouth – 7.71%
9. Coventry – 7.69%
10. Durham – 7.53%

Richard Rowntree, mortgages managing director for Paragon Bank, said: “Although major cities like London, Birmingham and Manchester often boast the largest student populations, they are not necessarily the best locations for generating yields in the student buy-to-let market.

“This is because such places are more likely to be home to purpose-built student accommodation and greater levels of competition, whereas smaller cities and towns have less competition from large-scale institutional investment.

“Something else we often see when looking at the best yielding student locations is relatively affordable property – the top five locations for yield have property valued below the national average of £278,000. Another common trend the top 10 yielding locations share is that they have smaller private rented sectors serving the student market.”