With property prices in the capital dropping and rental prices rising, now could be the perfect time to invest in buy-to-let in London. But where offers the best rental yields?

A rental yield is the annual return you can expect to see on your investment property. It’s calculated by dividing the expected annual rent by the value of the property. So, if a property costs £500,000 to buy, and achieves an annual rent of £25,000 its yield is 5%. Remember that this is the gross yield - before costs including your mortgage, agency fees and repairs. 

Yields are affected by current and future changes in an area, including:

• Transport links (especially to major London terminals and work hubs such as the City of London, Canary Wharf and Westminster).
• Planned and in-progress regeneration projects including housing developments, green space and new schools.
• Local facilities such as shops, bars and restaurants. 

Fast-regenerating East London offers some of the highest yields, with low prices and rising rents. But there are hotspots all over London - sometimes in unexpected places. 

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Our hot buy-to-let London favourites

East London: Stratford

Stratford, home of the 2012 Olympic Park, offers impressive average yields of 4.45%. Once an area of run-down housing and declining industry, London 2012 brought with it exciting regeneration. 

Why we love it: as well as lots of impressive new housing and the Olympic Park on-hand, it has its own Westfield centre and an eight-minute journey time into Liverpool Street.

West London: Hayes

Hayes offers yields up to an impressive 5.1%. This West London suburb was overlooked for years, but with Crossrail on its way and big new housing and leisure developments in the pipeline, it’s getting popular, fast. Get in before everyone else does. 

Why we love it: journey times into Paddington of 17 minutes once Crossrail opens, but just a stone’s throw from Heathrow and elegant Windsor. 

North-West London

Wembley

There’s much more to Wembley than the stadium. It offers yields of up to 4.8% and is the centre of a huge regeneration project offering over 10,000 new jobs and homes. 

Why we love it: excellent transport links, with 12 minute journey times to Marylebone and 30 minutes to Paddington. There’s great shopping at London Designer Outlet and of course, that matchday buzz.

Harrow

This pretty London suburb has a village heart and great views. Offering good yields of an average of 4.4%, this will always be a popular spot with young professionals and families alike. 

Why we love it: its lively bar and restaurant scene and friendly vibe make it ideal for those looking for atmosphere as well as quality housing. Journey times into Marylebone are 18 minutes.

South-West London: Pimlico

Genteel Pimlico offers surprisingly good yields for an area with relatively high prices. And it’ll never go out of fashion, with a great mix of period conversion flats and newer regeneration projects. 

Why we love it: walking distance from the City of Westminster, riverside views and a lively cafe culture.

South-East London

Elephant & Castle

Once one of London’s most down-at-heel areas, Elephant’s old high-density flats have been replaced with a mix of high-quality new homes, shopping and green space. 

Why we love it: a perfect mix of old and new London, with lots of atmosphere and journey times into St Pancras of just 12 minutes. 

Kidbrooke

Once overlooked in favour of its cooler sibling - nearby Greenwich, people are realising that Kidbrooke offers some fantastic new homes with Greenwich right on the doorstep, with yields of 4.1%.

Why we love it: long walks on Blackheath, lazy days exploring Greenwich village and journey times into London Bridge of 16 minutes. 

Lewisham 

Lewisham is an increasingly thriving village-style centre and has plenty of period houses and conversion flats. It’s also earmarked to be on a new Bakerloo line extension and offers yields of 4.2%.

Why we love it: a growing bar scene and great street food but with a real London vibe, and Greenwich just around the corner. Just 18 minutes into Cannon Street.

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Other high-yield areas to look out for

London is ever-changing and growing, with regeneration projects popping up everywhere. At the same time, established areas and traditional suburbs can offer surprisingly good yields to those in the know. 

Take a look at Newham, East Ham, Plaistow, Chingford and Poplar in the east. In the south-east, the inner suburb of Peckham and further out, Bexley and Bromley. To the south-west, Wimbledon still offers great returns. In the north, look to South Kilburn. And in the centre, go for Kings Cross and the Shoreditch and Aldgate areas of the City. 

Follow us on Twitter @lyvlylandlords for more real-time finance and advice for property owners. Have you recently invested in buy-to-let property in London? We’d love to hear from you at landlords@lyvly.uk