Landlords with student properties located in smaller university towns or cities typically generate the best yields, analysis by Paragon Bank has revealed.
Swansea was the top location for rental yield based on application data over the past two years, with the average rental income of £22,140 generating a yield of 9.56% against the average purchase price of £231,534.
The city is served by one main university, Swansea University, which boasts 20,3751 students.
Hull came second, with the average student property generating a return of 8.68%. Again, the location only hosts one main university, University of Hull, with 14,255 students.
Single university locations fared well, according to Paragon’s data, with seven of the top 10 locations for student yield only boasting one main university.
Student populations in these locations were also typically smaller at less than 25,000.
Out of the top 10 locations, only Liverpool, Coventry and Leeds had more than one university.
Richard Rowntree, managing director for mortgages at Paragon Bank, said: “When it comes to student property investment, heading to the major cities doesn’t always generate the best returns, as these figures demonstrate.
“Smaller towns and cities will typically have a lower proportion of purpose built student accommodation, which has become more commonplace in major cities, whilst major cities also offer a wider array of property that students can rent, such as city centre apartments or build-to-rent schemes.
“Smaller locations will often offer more traditional type student accommodation, such as houses in multiple occupation, whilst property values are generally cheaper in these locations, which can help generate better returns.”