Kent Reliance Predicts Strong Returns for Buy to let Property Investment

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Long-term buy to let property investments will bring significant returns for investors, in spite of recent regulatory and taxation changes according to Kent Reliance.

New analysis from Kent Reliance, the specialist mortgage lender and part of OneSavings Bank plc, said that landlords will see an estimated net profit of over £265,500 per property over the next 25 years. This is through rental income and capital gains. In today’s money, this works out to £162,000, or around £6,500 per property. The analysis applies to a basic tax paying landlord placing a typical 30 per cent deposit on a £73,908 on a property.

Capital gains make up a significant portion of a landlord’s returns. Assuming that house prices and rents rise in real-terms by 1 per cent per annum over the 25 year period, an average buy to let property would grow in value to nearly £516,000, providing gross capital gains of £269,464.   

A typical landlord receives rent of £10,134 per year per property. This is based on current yields and accounting for void periods. Over a 25-year period, a typical property would generate a total rental income of £369,495.

Figures also showed significant regional variation, affected by a range of house prices, yields and the initial deposit. Investors in London see the largest profit in cash terms, equating to £308,000 in today’s money. However, they are impacted by deposits of nearly twice the national average.

However, costs of running a rental property must also be considered. Calculations from Kent Reliance suggest that total costs amount to just over £373,000 over 25 years. This is equivalent to 58 per cent of the total income and capital gains for a landlord.

Sales and Marketing Director of OneSavings Bank, John Eastgate, commented: ‘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.’

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