Landlords cash in on rising returns - Buy To Let - News - Moneyfacts


Landlords cash in on rising returns

Landlords cash in on rising returns

Category: Buy To Let

Updated: 19/09/2014
First Published: 19/09/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

It's fair to say that it looks as though Generation Rent is starting to feel the pinch right now: according to the latest LSL Buy-to-Let Index, the average rent in August for residential properties in England & Wales hit a record high of £761 per month. Combined with rising house prices, and greater opportunities for investment, now is truly the time of the landlord, and things look set to get even better.

Rising rents

On a month-by-month basis, August rents were 1.1% higher than those seen in July, which equates to a total of £8 extra added on to the monthly rental bill. This smashes the previous rent record of £758, which was set in October 2013. Rents have also shown a rise on an annual basis: rent is now 2.4% higher than it was in 2013; meaning tenants are shelling out an additional £15 on their monthly rent per year.

According to the latest figures, seven out of 10 regions posted a hike in rent. This was spearheaded by the South West, which posted a year-on-year rise of 3.5%. The South East also registered significant increases, with an annual increase of 3.4%, closely followed by the North West, which had a rise of 3.3%.

A mixed picture

However, not all regions saw record-breaking rents. London was out of the top three regions that witnessed big rises, with an annual increase of only 3.0%. Meanwhile, rent in the North East was actually 1.6% lower than it was in 2013, and rent in the West Midlands and Wales also dropped (by 0.4% and 0.1% respectively). So, while rental prices may be booming in some regions, not all are witnessing such a high tide.

Yields for landlords

Nevertheless, for landlords in England and Wales, yields are certainly looking rosy. Gross yields in August were up month-on-month from July's total of 5.0%, while total annual returns on an average rental property (before mortgage repayments and maintenance) stood at 12.7% year-on-year. This is an increase of 6.4% from August 2013.

This means that the average landlord in England or Wales saw a return of £21,239 over the last 12 months before mortgage costs and repairs.

However, only £8,233 of this return is from rent; the remaining £13,006 is actually from capital gain from increased house prices. David Brown, commercial director of LSL Property Services, explains: "Landlords have benefitted from higher property prices, which is helping portfolios to expand and more homes become available to let." He adds that the hold on interest rate rises is also adding to the "cocktail of opportunities" for landlords, ensuring that now is the best time to boost profits.

Cashing in on buy-to-let

If times have been good to landlords so far, it appears that the future holds even better things for those willing to invest. If rental property prices continue to rise at the same rate as over the last three months, the average landlord could expect a return of £30,997 (17.2%) per property.

So, if you want to take the plunge and get on the buy-to-let bandwagon, now is the perfect time. And if you are already a landlord, but want to extend your portfolio, the current market could also offer you the ideal opportunity. To get you started, check out our buy-to-let mortgage best buy tables. Whether you are a first-time landlord, or you want to remortgage properties on your portfolio, you're sure to find a deal that suits you and your property ambitions.

What next?

Check out the best buys in the buy-to-let mortgage market

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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