Is Sunderland really smarter than Cambridge for landlords?

An email landed in my inbox describing Cambridge as the worst city in Britain for buy-to-let investors and asking whether Sunderland could now be the smartest place to invest. I can understand why that headline works, because a Landlord Resource analysis, drawing on Zoopla data to September 2025, puts the average gross rental yield in Cambridge at 4.7%, followed by Oxford at 5% and London at 5.1%. Sunderland appears at the opposite end of the table with an average gross yield of 9.3%, so anybody looking at where to invest fresh capital would be perfectly justified in asking why they should pay £408,709 for an average property renting for £1,600 a month in Cambridge when £84,924 apparently buys a property renting for £659 a month in Sunderland.

The comparison becomes even more interesting when expressed in pounds rather than percentages. At the quoted averages, four Sunderland properties would cost £339,696 and generate annual gross rent of £31,632, whereas one average Cambridge property would be worth £408,709 and produce annual rent of £19,200. Ignoring transaction costs, it appears that a landlord could exchange one Cambridge property for four in Sunderland, increase gross rent by £12,432 a year and still have £69,013 left over. That is a compelling calculation, although it also means exchanging one property and one tenancy for four properties, four tenancies and four sets of maintenance, compliance, void and management risks. Selling in Cambridge could trigger mortgage redemption costs, estate agency and legal fees and Capital Gains Tax, while buying four properties in Sunderland would involve acquisition taxes, surveys, legal work, finance arrangements and possibly refurbishment expenditure. The landlord may also understand Cambridge intimately but have no knowledge of which Sunderland streets, property types and tenant markets justify the headline yield.

This is why I do not think the figures establish that Cambridge is a bad place to be a landlord or that Sunderland is automatically the smarter investment. They tell us something useful about the relationship between current property values and rents, but the more interesting question is what those low yields might reveal about landlords who already own properties in Cambridge, Oxford, London and other high-value locations. In many cases, the low yield may not be evidence of a poor historic investment at all. It may be the legacy of an extremely successful one.

When capital growth creates a new commercial problem

If a property increases in value faster than its rent, its gross rental yield will inevitably fall. A landlord who bought in Cambridge 20 years ago may therefore have accumulated substantial wealth through capital growth while seeing a much smaller increase in spendable income. The property may remain profitable, the tenant may be reliable and the landlord may still regard the purchase as one of the best financial decisions they ever made, but none of that tells us whether the much larger amount of equity now tied up within the property is producing a sufficient return today.

The period over which this is considered matters enormously. Official UK House Price Index data shows that average values in Cambridge increased by approximately 85.8% between May 2006 and May 2026. Oxford increased by 85.3% and London by 105.5%, compared with 33.5% in Sunderland. The picture over the most recent decade was almost the reverse, with Sunderland increasing by approximately 38.9% between May 2016 and May 2026, while Cambridge rose by only 5.2% and London by 8.9%. I would therefore not use historic figures to predict that southern property will necessarily outperform the North from this point onwards, but they do help explain how landlords who bought during the earlier buy-to-let boom may now be sitting on substantial capital gains that are producing relatively modest levels of cashflow.

This is the distinction I believe the original comparison misses. A property can have been an outstanding historic investment while becoming a relatively weak current use of capital. The landlord has not lost money and may have become considerably wealthier, but the commercial question has changed from whether the original purchase was successful to whether the equity accumulated since then is still working hard enough. That question cannot be answered by comparing today’s rent with the original purchase price or the original deposit, because those calculations ignore the much larger amount of the landlord’s wealth that is now committed to the property.

What is the landlord’s current equity actually earning?

Gross rental yield is calculated by dividing annual rent by the current property value. It makes no allowance for mortgage interest, repairs, management, insurance, service charges, regulatory compliance, licensing, voids or any of the other costs associated with operating the property. It also tells us nothing about how much of the property now belongs to the landlord rather than the lender, which is why I believe cashflow return on equity is often a more revealing measurement for an existing landlord. The calculation takes annual rent, deducts property operating costs and mortgage interest, and then divides the remaining cashflow by the current property value less the outstanding mortgage. Where a repayment mortgage is involved, I would normally show the capital element separately because it reduces spendable cashflow while simultaneously increasing the landlord’s equity.

To demonstrate the difference, consider a deliberately simplified example based on the Cambridge averages in the Zoopla analysis. Suppose a landlord bought the property many years ago for £200,000 using a £50,000 deposit and a £150,000 interest-only mortgage. The property is now worth £408,709, while the mortgage remains at £150,000. The landlord has done extremely well in capital terms because the property has increased in value by £208,709, before considering inflation, acquisition costs or any Capital Gains Tax that might eventually become payable, and the landlord’s current equity has increased from the original £50,000 deposit to £258,709.

If the landlord compares the £6,150 cashflow with the original £50,000 deposit, the property appears to be producing an annual return of 12.3% on the money initially invested. That looks impressive, but it overlooks the additional £208,709 of wealth now locked into the property. The landlord is choosing to leave £258,709 invested in this particular asset, so the commercially relevant figure is the return being generated by all of that current equity. If the mortgage rate increased to 6.5% at the next refinancing, annual cashflow would fall to £4,650 and the return on equity would reduce to approximately 1.8%. Even if the mortgage were repaid completely, allowing 25% of rent for operating costs would leave £14,400 of pre-tax cashflow on equity of £408,709, representing approximately 3.5%.

I am not suggesting that any of those percentages automatically justify selling. A landlord may accept a modest current cashflow return because the property has a particularly reliable tenant, requires very little attention, provides diversification or is expected to produce further capital growth. Another may simply prefer the familiarity and perceived security of an unencumbered property to alternative uses of the capital. Those are perfectly legitimate considerations, but they should form part of a conscious decision rather than being obscured by a calculation based on what the property cost 20 years ago.

How could the cashflow position be improved?

The first step is not necessarily to sell anything. It is to establish whether the existing property can produce more income or operate more efficiently. A lawful and sustainable rent review may be appropriate where the rent has fallen behind the local market, while reduced void periods, more effective management, better procurement of insurance and services, or targeted improvements to the property could also increase cashflow. In the Cambridge illustration, an additional £100 a month of rent would add £1,200 a year before related costs and tax. Reducing the mortgage rate by one percentage point would save £1,500 a year on the £150,000 loan, while reducing the assumed operating costs by 10% would save a further £480. None of those improvements should be assumed to be available, because rent increases depend on the property and local market, refinancing can involve arrangement fees and early repayment charges, and reducing expenditure must not mean deferring essential maintenance or compliance. The value of the exercise is that it reveals which changes could make a material difference and which would merely tinker around the edges.

Expensive or inappropriate borrowing can sometimes be the real problem rather than the property itself, so mortgage balances, rates, maturity dates and refinancing options need to be examined alongside the return generated by each asset. A landlord might conclude that selling one capital-heavy property and using the proceeds to repay expensive borrowing against several stronger properties would improve overall cashflow and reduce refinancing risk. Every £100,000 of interest-only borrowing repaid at 6% improves annual cashflow by approximately £6,000, although that does not automatically make repayment the best use of the money because the landlord must also consider what else the same capital could earn. Releasing equity creates the reverse calculation because it reduces the amount of equity left in the property but increases interest costs, so it only improves the wider position if the released capital is redeployed at a return sufficient to cover the additional borrowing cost, transaction expenses, risk and workload.

Selective sales may therefore deserve consideration where one or two properties contain a disproportionate amount of equity for the cashflow they produce. The relevant figure is not the headline sale price but the amount that would remain after mortgage redemption, selling costs, Capital Gains Tax and any early repayment charges. The order of disposal can also be important because the property with the most equity may have the largest embedded gain, while another property with less equity might be producing weaker cashflow, require more work or carry greater refinancing risk. Some landlords will use sale proceeds to reduce debt, others may acquire higher-yielding properties, and some approaching retirement may decide that they would prefer fewer properties or more hands-off investments even if that involves accepting a slightly lower headline return. The right answer depends on what the landlord wants their accumulated wealth to achieve next.

The answer lies in the portfolio rather than the postcode

A city-level yield table cannot identify which properties an individual landlord should retain, improve, refinance or sell, because the differences within a portfolio can be far more important than the differences between Cambridge and Sunderland. One property may have modest borrowing, low operating costs and a dependable tenant, while another may be burdened by an expensive mortgage, high service charges or repeated maintenance problems. A third may produce excellent cashflow because it contains very little equity but become loss-making when its current fixed-rate mortgage expires. This is why calculating return on equity for the portfolio as a whole is only the beginning; each property must also be examined separately and stress-tested against future borrowing costs.

Our recent case study of a £3.4 million property portfolio illustrates what this can reveal. The portfolio contained approximately £1.071 million of apparent equity and produced an estimated cashflow return on equity of 7.8% before tax at the existing mortgage rates. When the borrowing was stress-tested at 6%, the return fell to just 1.54%, and nine of the 20 properties became individually cashflow negative. Looking at the properties separately revealed estimated current returns ranging from 21.9% to 3.4%, while one apparently underperforming asset did not necessarily need to be sold because unusually expensive borrowing, rather than the property itself, was suppressing its return. The analysis did not support a simplistic recommendation to sell everything or retain everything. It exposed the choices and allowed the owners to consider which outcome best matched their own priorities.

That is how I believe return on equity should be used. It is a diagnostic tool rather than an instruction to sell, and it helps a landlord to ask whether the income produced by each property remains proportionate to the equity, risk, workload and responsibilities involved. Tax, finance and ownership planning then become important when considering how to implement the preferred commercial outcome, but they should not dictate that outcome. Incorporating or restructuring a portfolio achieves very little if it simply preserves properties the landlord no longer wants to own, just as selling an established portfolio without first understanding the net proceeds, lost income and realistic alternatives could create an expensive and irreversible mistake.

What is your equity earning now?

The landlords most likely to benefit from this analysis are not necessarily those with failing portfolios. They may be people who made excellent buying decisions 15 or 20 years ago, accumulated substantial equity and now find themselves with a profitable portfolio that produces surprisingly little income relative to its value. A landlord with £1 million of equity producing £30,000 of sustainable annual cashflow is in a very different position from somebody producing the same income from £300,000 of equity, even though the rent and accounting profit might initially appear identical. The appropriate response may be to retain everything, improve rents, refinance selected properties, reduce debt, sell one or two assets or dispose of the entire portfolio over an orderly period. No two landlords will reach the same conclusion because their requirements for income, liquidity, workload, retirement and succession will be different.

This is one of the exercises we undertake through a Property118 consultation. We begin with a private conversation about the landlord’s circumstances, portfolio and objectives rather than a predetermined recommendation to sell, incorporate or restructure. Where detailed analysis is appropriate, we calculate current and stressed cashflow returns across the portfolio and model the practical effect of retaining properties, refinancing, reducing debt, selling selected assets or pursuing a more substantial change of direction. The consultation costs £400 including VAT and begins with a private, recorded Zoom meeting, after which the client receives the recording, written notes and the actions agreed. Where further information and analysis are required, we prepare a written review and arrange a follow-up meeting to discuss the available options, leaving the client to decide which direction best reflects what they want their property business and accumulated wealth to achieve.

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The worked example is illustrative and does not represent a recommendation concerning any particular property or location. UK HPI figures are nominal and May 2026 estimates remain provisional. This article provides general information and does not constitute personalised investment, tax, legal or regulated financial advice.