What is the Best Type of Property for Buy-to-Let Investments (With Examples)
Whether you’re a seasoned investor or looking to get into the market, you’ll know how important different property types are to a portfolio. Different property types bring different demographics, which is vital when building yourself a future-proof, diverse portfolio, but what is the best type of property for buy-to-let investment?
We’re asked “what is the best type of property for buy-to-let investments” all the time. It’s understandable, houses and apartments each come with their own selling points, especially when you factor in different locales and how they change demand for different property types.
Purchasing a property is a huge decision, so most investors want as much information on the local market as possible. Tenant demand is the biggest factor for successful property investment, and knowing the best type of property for buy-to-let investments to attract tenants is vital for the success of your portfolio.
What types of property can you choose from?
When it comes to investing in buy-to-let property, one of the first decisions you’ll need to make is choosing between houses and apartments. Typically, it’s a very personal decision, often depending on your financial goals and investment strategy. You need to think about whether you’re looking for short-term returns or hoping for maximum growth in the long term.
It’s no secret that in comparison to houses, apartments generally offer much higher rental yields, but there are outliers to look out for. In locations like Birmingham in the UK, our research shows that houses in Birmingham average a rental yield of 7%, whereas apartments across the city are reaching almost 6.7% rental yields, and in the city centre, apartment yields reach 7% and higher.
If you’re looking to make money quickly through buy-to-let property, apartments in high-demand areas of the city, including the Jewellery Quarter and the centre, are often the best type of property to rent out in Birmingham, largely due to the city’s popularity amongst ‘Generation Rent’.
When it comes to capital growth, according to PropertyData, house prices have typically outpaced apartments over a 20-year period, growing by around 130–150% compared to approximately 80–100% for flats. That said, apartments have still delivered meaningful long-term appreciation, particularly in high-demand urban areas.
You should also consider the demographic of renters you’re targeting. If you’re looking to target students, a common option is to opt for larger houses that can be used as an HMO investment, while city-centre apartments are better suited to young professional couples.
Related: What Do UK Tenants Really Look For in a Rental Property?
Does size matter?
Knowing the best type of property to invest in for you is the first step, but regardless of whether you’ve decided on a house or an apartment, you’ll need to think about how many bedrooms you want.
This decision may seem fairly straightforward, but much like the apartments vs houses debate as a whole, the size of the property influences various other factors.
For example, properties with three bedrooms or more tend to attract families, whereas one and two-bedroom apartments are increasingly popular amongst young professionals and couples.
Data from Gov.UK shows that couples aged 25-35 are the biggest demographic of renters, making roughly 33% of the market and stay in rented homes for at least three years.
As such a large segment of the rental market, this may influence your decision to invest in a two-bedroom apartment in the city centre, giving you the ideal property to directly target couples.
In Joseph Mews research using PropertyData, we’ve found that overall studio apartments tend to deliver the best rental yields but make up only 4% of our sample size.
On the other hand, one-bedroom apartments make up 31% of the stock distribution and deliver the second-best average yield at 6%.
This is closely followed by two-bedroom apartments that deliver yields of 5.26% and make up 42% of the wider market.
Best type of property for buy-to-let investment by yield, rents and stock distribution
Below you can find a breakdown of how different property types perform in relation to yield, rents and stock distribution, based on our own research into the Birmingham and wider UK property market using PropertyData:
Rents
Studio: £811
One-Bed: £945
Two-Bed: £1,209
Three-Bed: £1,790
Yields
Studio: 8.9%
One-Bed: 6.5%
Two-Bed: 9.0%
Three-Bed: 7.3%
Market Distribution
Studio: 4%
One-Bed: 31%
Two-Bed: 42%
Three-Bed: 15%
Other: 8%
What features do the best properties for buy-to-let investment share?
When you’re looking to identify the best type of property for buy-to-let investment, there are some common threads that you should be looking for.
Jobs Market: Investment areas that have more jobs (or higher-paying roles) are more likely to rent. A healthy jobs market attracts tenants and can help mitigate void periods. This is why you might see the housing market rise with the announcement of a major company moving to the area.
Amenities: Having a good mix of amenities near the property will make sure that tenants are looked after. In this case, amenities could be anything from green spaces to local bars and restaurants. It can always be a good idea to take a tour of the local area, whether that’s in person or via an internet search.
Area Demand: What is the tenant demand in your area? If you’re buying near a university, chances are that you’ll have plenty of rental enquiries from students. Similarly, if you’re investing in a city centre near large offices, you might find that you’ll get interest from working professionals. Choose depending on your strategy.
Rental Performance: How are the rental yields in the location around your buy-to-let investment? Rental income is your most important resource, so you need to make sure that it can cover your mortgage payments. At the same time, think long-term. Where are rental prices heading in the future?
Future Development: Otherwise known as regeneration, what are the plans for the location you’re investing in? If there’s plenty of new redevelopment, you’re likely investing in a growth area. Likewise, if a train station is due to be built in the next year, you know that your property will likely be in higher demand.
Related: Top 10 Features of a Profitable Rental Property
Read our example: The Birmingham rental market
Examining a case study is an easy way to understand the best type of property for a buy-to-let investment.
As part of our research, we’re looking at the Birmingham rental market.
With the younger generation continuing to dominate the rental market, it’s no surprise that 60% of renters in Birmingham city centre are under-35.
Birmingham has long been a destination for young professionals, and as a key demographic in the city’s rental market, their preferred property type and size should be at the forefront of investors’ minds.
While renters are getting increasingly younger and are staying in the market for much longer, the city’s 1.8 occupancy rate reinforces the trend of co-living. Whether people are renting as a couple or sharing with friends, this continues to highlight why apartments are often the best property type to invest in, especially in Birmingham.
Naturally, the co-living trend has increased the potential of bigger apartments in the city. With the demand for more spacious homes, these renters are now attracted more to two-bedroom apartments.
The rising demand for two-bedroom apartments in Birmingham has seen this property type achieve considerably higher yields, on average, than its one-bedroom counterparts. As a result, the English Private Landlord Survey has revealed that almost 50% of landlords rent their buy-to-let properties to couples.
Generally speaking, landlords have a preference towards this demographic, which has been influenced by a number of different factors. As well as making up over half of Birmingham’s rental market, couples tend to have a higher household income and are willing to spend more on rent.
Combined with their increasing time in the rental market, it’s no surprise that two-bedroom apartments are considered the best property type to invest in amongst the majority of property experts and landlords.
The popularity of two-bedroom apartments in Birmingham
Two-bedroom apartments have long been one of the best-performing properties in the rental market with competitive rents and growing yields. Research with PropertyData has found that this extra bedroom can often push rental yields to 8.6%%, which, when compared to smaller alternatives, with one bed averages sitting at 6.6%, is notable.
Birmingham’s affordability has long been a key driver behind both the popularity of this property type and its continued success in the local market. For example, at the time of writing, Birmingham’s average property price is sitting at just £234,328, unlike London’s £542,000.
While property still remains relatively affordable in comparison to other UK cities, research by Home suggests that the average rental income for a two-bedroom property in Birmingham is over £1,200, making it one of the best types of property to rent out in the city.
When it comes to investing in property, there isn’t a ‘one size fits all’ approach. The various decisions that emerge along the way, including property types and the number of bedrooms, have the potential to make or break a property portfolio.
That said, with the likes of Birmingham housing a growing demographic of young professionals, certain properties, such as two-bedroom apartments, are becoming the best types of property to invest in.
Offering more space and more luxuries, this property type is not only yielding some of the highest rents in the market, but is becoming increasingly more demanded by both tenants and investors.
FAQ’s
What is the best type of property for buy-to-let investment?
While there is no “one size fits all” answer, two-bedroom apartments are currently considered one of the best property types for buy-to-let investment. They offer a balance of high rental demand from young professionals and couples, competitive rental yields (often exceeding 9%), and strong capital growth potential.
Are houses or apartments better for rental yields?
Generally, apartments offer higher rental yields than houses, particularly in city-centre locations. For instance, in Birmingham, while houses average a 7% yield, city-centre apartments can reach or exceed those same levels due to high demand from “Generation Rent.”
Which property size delivers the highest rental yield?
Based on market research, studio apartments often deliver the highest individual rental yields (averaging around 8.9%). However, they only represent a small portion of the market (4%). Two-bedroom apartments are often preferred by investors as they offer high yields (approx. 9%) alongside a much larger tenant pool and market distribution.
Who is the most common demographic for UK rental properties?
Couples aged 25-35 are the largest demographic, making up roughly 33% of the rental market. This group typically prefers one or two-bedroom apartments in urban areas and tends to stay in a rented home for at least three years, providing stability for landlords.
What features should I look for in a buy-to-let property?
To ensure a successful investment, look for properties in areas with:
- A strong jobs market: High employment drives rental demand.
- Local amenities: Proximity to green spaces, bars, and shops.
- High area demand: Locations near universities or major business hubs.
- Planned regeneration: Future developments or new transport links (like train stations) can significantly boost property value.
Why is Birmingham a top choice for buy-to-let investors?
Birmingham is highly popular due to its affordability compared to London and its large population of young professionals. With 60% of city-centre renters under the age of 35, there is a consistent demand for modern apartments, leading to strong rental performance and capital growth.
Do larger properties make good buy-to-let investments?
Larger houses (three bedrooms or more) are excellent for targeting families or for use as HMO (House in Multiple Occupation) investments, particularly in student areas. While they may have different growth patterns from apartments, they are vital for building a diverse and future-proof portfolio.