Should I invest in a buy-to-let in Newcastle?

Entering into the property market is an exciting prospect to consider, but at times, there will be big decisions that you will need to make. Staying informed is the best way to be able to make these decisions, such as whether or not to invest in a buy-to-let in Newcastle.

There are many factors to consider when weighing up the pros and cons of investing in the rental market in Newcastle. In this guide, we will take a look at:

• the rental market in Newcastle

• the expected rental yield

• benefits of investing in Newcastle

• the amenities in Newcastle
• landlord insurance

Newcastle Upon Tyne, more casually known as Newcastle, is a city known for its teeming nightlife and is the most populated city in the North East of England. Investing in a buy-to-let in Newcastle is, unsurprisingly, a strategic business decision to make, and here are all the reasons why. 

Benefits of investing in a buy-to-let in Newcastle

As we’ve mentioned, there is copious opportunity available in Newcastle on the property front, including a variety of property types and tenant types that can be targeted. Let’s take a look at some of the other reasons why investing in a buy-to-let property in Newcastle is the next best business decision to make for you. 

High rental yields: 

Rental yield is a metric used to evaluate the return on investment for a rental property. The way in which rental yield is calculated is by dividing the annual rental income by the property’s purchase price. Naturally, the higher the rental yield, the better for landlords. 

The rental yield of a property is probably one of the most important factors to consider when deciding which buy-to-let property to invest in because it determines how much profit you will make as a landlord. 

Equally, knowing which factors influence the rental yield of a buy-to-let property will help you make informed decisions. There are several factors that affect the rental yield of a property, such as the location of the property, the type of property, the current rental market conditions, and the condition of the property itself. For example, properties in high-demand areas with low vacancy rates will typically have higher rental yields than properties in less desirable locations with high vacancy rates.

Additionally, landlords should also take into account the net rental yield when deciding on a property, as this takes into account the property’s operating expenses including mortgage interest payments, property taxes and maintenance costs. This is a more accurate representation of the actual return on investment that an investor can expect to receive. 

For the sake of investing in Newcastle, it is worth mentioning that this city consistently offers some of the highest rental yields in the UK, and has done so as of 2023. The average rental yield in Newcastle is at 6.5%, meaning that you can earn a good return on your investment in the form of rental income as a landlord. 

Strong capital growth: 

The property prices in Newcastle have been steadily increasing over the past decade and looks as though there’s no stopping this any time soon. So, what exactly does this mean? Your buy-to-let property could appreciate in value over time, providing you with a significant amount of capital gain if you do decide to sell. 

Growing demand for rental accommodation: 

Due to the size of the city and all that it has to offer, there is a large and growing population which automatically drives up the demand for rental accommodation. The more vibrant and busy areas of Newcastle, such as the city centre, especially offer this due to Universities being close by and a high concentration of students and young professionals needing accommodation.

Potential tax benefits: 

Tax is an important part of any business and understanding the tax implications is crucial to a successful property portfolio as a landlord. There are several tax benefits available to buy-to-let landlords, such as: 

• Landlords can deduct the interest they pay on their mortgage from their rental income before calculating their taxable profit. This can significantly reduce their tax liability.

• Landlords can claim a wear and tear allowance to offset the depreciation of their property and furnishings. This allowance is based on a percentage of the property’s value and the type of furniture.

• Landlords can deduct the cost of replacing furnishings, appliances, and kitchenware in their properties. This relief is available for a wide range of property businesses.

• Landlords can deduct the cost of maintenance and repairs to their properties, such as replacing carpets, repairing plumbing, and painting walls.

• Landlords can deduct the fees they pay to let agents manage their properties.

• Landlords can claim an annual allowance of £1,000 to offset the costs of running their property business. This allowance can be used to cover expenses such as stationery, postage, and travel.

• Landlords can deduct the interest they pay on loans to buy furnishings for their properties.

• Landlords can deduct the fees they incur when taking out or repaying mortgages or loans for their properties.

It is important to note that the tax rules for buy-to-let landlords are complex and can change frequently. As a landlord, you should seek professional advice from a tax advisor to ensure that you are claiming all of the tax benefits you are entitled to. 

Additionally, tax benefits for buy-to-let landlords are different for higher-rate and additional-rate taxpayers. Landlords may also be able to claim capital gains tax relief when they sell their buy-to-let property. As well as this, landlords may be able to claim tax relief for the cost of energy-efficient improvements to their properties. 

For more information on the tax benefits for buy-to-let landlords, please visit the HMRC website. 

Amenities in Newcastle

Now, before we delve into what the Newcastle rental market looks like, let’s take a look at the amenities in Newcastle that would make your buy-to-let property even more appealing. 

The City

The Grainger Town area is the historic heart of Newcastle with jewels such as Grainger Market and Theatre Royal. Did you know that 40% of the buildings in this area are listed as of historical and architectural importance? In light of this, owning a buy-to-let property in Newcastle brings a lot of culture with it. 

The focal point of Grainger Town is Grey’s Monument which was erected in 1838 in order to commemorate the Reform Act of 1832. This act was drafted during Earl Grey’s time as Prime Minister.  

Another advantage of owning a buy-to-let in Newcastle is Grainger Market. After being open for 200 years, the market never fails to deliver its best service to the townsfolk. During the COVID-19 pandemic, the market stayed open, selling essential items only and also delivering packages to families. 

Transportation

Much like in London, owning a car in Newcastle is unnecessary given the strong transportation links within the city. Tyne and Wear Metro connects the city centre with Gateshead, Sunderland, the coast, Newcastle Airport and the railway station. It is safe to say that the transport line in Newcastle is efficient. 

Schools

Boasting 16 schools, Newcastle is home to some of the highest-rated schools, such as the Royal Grammar School, Central Newcastle High School and Newcastle-upon-Tyne Church High School. There are also many primary schools to choose from in and around Newcastle, so the option for newlyweds looking to start a family is a fruitful one. 

Parks

Town Moor is a green space, larger than London’s Hyde Park and Hampstead Heath put together, is one of Newcastle’s famous parks. There is also St James’ Park, the stadium home of Newcastle United F.C and Leazes Park to the northwest of the city centre. 

Retail

Weekends are for enjoying life and that is exactly what Newcastle offers with its shopping centres and restaurants. By visiting Eldon Square Shopping Centre (one of the biggest shopping centres in the UK) or Northumberland Street where you can enjoy some major high street shops. 

Nightlife

Home to ‘The Diamond Strip’, Newcastle easily ranks as one of the best places to party! It runs along Collingwood Street and is right in the centre of the city. Another option for a great night out in Newcastle is The Bigg Market; the biggest club coupled with themed nights gives you a great Friday or Saturday night out! 

What does the Newcastle rental market look like?

Now it’s time to get down to the nitty-gritty and talk about what Newcastle’s rental market looks like. 

Newcastle’s rental market is currently experiencing strong demand and limited supply, which is driving up rents. The average rent for a one-bedroom apartment in Newcastle is £600 per month, and the average rent for a two-bedroom apartment is £750 per month. Rents are expected to continue to rise in the short to medium term, as demand outpaces supply.

So, what exactly is making the rental market so lucrative and driving up rents in Newcastle? 

For starters, the population in Newcastle is steadily increasing, meaning that there is more demand for rental properties. 

A lot of people are relocating to the city to either study or work due to the rise in popularity of the city. As you may already know, Newcastle is home to two universities which brings in a large student population. 

Another factor that is increasing rental prices is the limited supply of rental properties. Essentially, there is low supply and high demand. 

Demand for different types of rental properties:

Naturally, there is a demand for different types of rental properties, such as apartments or houses. 

For example, the demand for one-bedroom apartments is the most in-demand type of rental property in Newcastle. They are extremely popular with students and young professionals who are just starting their independent careers. 

Two-bedroom apartments are also high in demand as they are more suited for couples and small families. As you can imagine, three-bedroom apartments are not as popular as one and two-bedroom apartments as it would be less convenient and more expensive for bigger families to live in the city centre. 

Areas with the highest rents:

As a landlord, it is important to know which areas hold the highest rents and which are the highest in demand so that you invest in the correct areas. 

Jesmond:

Jesmond is an upscale suburb lined with Georgian and Victorian homes and houses a mix of students, young professionals and families alike. The nightlife in Jesmond offers debonair cocktail bars and late-night burger joints or Italian cuisine if you fancy it. 

For those who love being outdoors, leafy Jesmond Dean Park is home to a grand hotel and is perfect for families with its woodland and petting zoo. 

The average rent for a one-bedroom apartment in Jesmond is £750 per month, and the average rent for a two-bedroom apartment is £950 per month.

Quayside:

Once an industrial area and commercial docking area, Quayside has since changed its tune and is now a trendy area for tourists. 

Visitors can now enjoy some of the most popular tourist attractions, including Tyne Bridge, the BALTIC Centre for Contemporary Art, and the Glasshouse International Centre for Music, formally known as Sage Gateshead. This is the perfect area for those tenants who are cultural and music enthusiasts. 

The average rent for a one-bedroom apartment in Quayside is £700 per month, and the average rent for a two-bedroom apartment is £850 per month.

Ouseburn:

Boasting one of the most vibrant and creative communities in Newcastle, Ouseburn is another area that would make a good investment as a landlord. Ouseburn was once known as the cradle of the Industrial Revolution, but through regeneration, has since become a trendy and sociable area.

There is an array of activities to take part in, both during the day and night and investing in a buy-to-let here would mean that you have access to all of the independent businesses that thrive in Ouseburn. 

The average rent for a one-bedroom apartment in Ouseburn is £600 per month, and the average rent for a two-bedroom apartment is £750 per month.

Heaton:

This leafy suburb is home to a mix of families and young professionals. It’s known for its good schools, parks, and green spaces. If you want to invest in an area that is not in the city centre, Heaton is a great option! 

Owning a buy-to-let in Heaton means that your tenants have the opportunity to live within a bohemian culture, filled with artisan cafes and independent greengrocers. It’s a trendy neighbourhood and investing in Heaton would be a great addition to your property portfolio. 

The average rent for a one-bedroom apartment in Heaton is £650 per month, and the average rent for a two-bedroom apartment is £800 per month. 

Sandyford:

Nestled just a short stroll from Newcastle’s bustling city centre, Sandyford emerges as a captivating suburb brimming with go-to brunch hotspots, bustling nightlife and green spaces.

Whether your tenant is a student seeking easy access to both universities or a young professional eager to explore the city’s vibrant shopping and leisure districts, Sandyford effortlessly caters to their needs.

The average rent for a one-bedroom apartment in Sandyford is £600 per month, and the average rent for a two-bedroom apartment is £700 per month.

Landlord insurance

Landlord insurance is one of the most important aspects of being a landlord. Although not a legal requirement, landlord insurance gives you the peace of mind to know that if anything drastic happens your investment is covered. 

If you are new to being a landlord, you may not know where to begin. Here are a few steps that you can take to help you choose the right landlord insurance for you. 

Compare quotes: 

Start by comparing quotes from different insurance providers. You can do this online or through a broker, like CIA Landlords who are never beaten on prices. When comparing quotes, be sure to consider the level of cover, the excess, and the premium.

Consider your needs: 

Think about what type of cover you need. Landlord insurance typically covers buildings and contents insurance, buy-to-let insurance, and landlord flat insurance, for example. You may also want to consider additional coverages, such as accidental damage insurance and landlord liability insurance.

The best thing to do is to do your research to figure out which type of coverage would be the best for you. 

Provide accurate information: 

When applying for landlord insurance, be sure to provide accurate information about your property, your tenants, and your rental history. This will help the insurer to assess your risk and provide you with an accurate quote. Also, be sure to give your insurance broker honest information. 

Choose a reputable provider: 

Choose a reputable insurance provider with a good track record of customer service. You can check online reviews and ratings to help you make a decision. 

Review your policy: 

Once you have chosen a policy, be sure to review it carefully to make sure you understand what is covered and what is not.

Keep your policy up-to-date: 

Make sure to keep your policy up-to-date by informing your insurer of any changes to your property, your tenants, or your rental agreement. This is important because if anything does happen and you haven’t been honest with your insurance provider, or have kept them up-to-date, your property may not be covered should there be an emergency. 

All-in-all, Newcastle is a place filled with opportunity as a landlord and it is worthwhile investing in a buy-to-let here. For all of your landlord insurance needs, contact CIA Landlords today on 01788 818 670.