Buy to let landlords pocket an average return of £6,500 a year from a typical £246,000 investment property, according to new research.
Despite suffering a tax squeeze imposed by the government, property investors can still make significant returns, explains the OneSavings Bank, the parent of buy to let mortgage lender Kent Reliance.
Kent Reliance research shows that after putting down a 30% deposit of £73,908 on a £246,360 home, the property would generate a net profit of £265,650 after 25 years, after deducting tax and costs.
Adjusting for inflation at 1% over the period, that equates to a £162,000 profit at today’s values.
No more speculation
John Eastgate, sales and marketing director at OneSavings Bank, said: “The buy to let market is undergoing a sea change. Regulatory and taxation changes have altered the market dynamic, reducing its attractiveness to amateur landlords, and increasing the tax bills of higher-rate investors.
“In spite of rising costs, there are still healthy returns to be found in property for committed investors.
“However, the days of speculation are gone. It is a long-term business endeavour, requiring commitment and expertise. Investors must be prepared to undertake business and tax planning, understand the risks as well as the rewards, and, most importantly, the responsibilities they have towards their tenants.
“Policy change remains a threat, however, and it is essential that the role of professional landlords in providing vital housing stock is not undermined. Without them, the supply of housing in the sector would naturally shrink, leading to higher rents for a growing number of tenants competing for accommodation.”
Buy to let profits by UK region
| Deposit | Initial rent (Annual) | 25-year totals | ||||
| Rent | Capital Gain | Costs | Profit | |||
| London | £158,225 | £19,416 | £707,876 | £576,878 | £779,633 | £505,121 |
| East of England | £70,153 | £8,844 | £322,451 | £255,774 | £343,955 | £234,270 |
| South West | £60,864 | £8,245 | £300,614 | £221,905 | £305,416 | £217,103 |
| Yorkshire and Humber | £37,712 | £7,032 | £256,364 | £137,494 | £213,033 | £180,824 |
| North West | £36,883 | £7,090 | £258,514 | £134,472 | £211,102 | £181,884 |
| Wales | £37,835 | £5,112 | £186,398 | £137,943 | £188,218 | £136,122 |
| South East | £81,301 | £9,964 | £363,274 | £296,417 | £395,925 | £263,766 |
| North East | £29,512 | £4,389 | £160,027 | £107,597 | £151,618 | £116,006 |
| West Midlands | £45,027 | £7,260 | £264,693 | £164,166 | £240,186 | £188,673 |
| East Midlands | £44,759 | £7,588 | £276,665 | £163,188 | £243,617 | £196,236 |
| Scotland | £52,819 | £8,710 | £317,557 | £192,574 | £284,678 | £225,454 |
| UK | £73,908 | £10,134 | £369,495 | £269,464 | £373,309 | £265,650 |
Source: Kent Reliance
