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Rising property values mean big landlord returns

Rising property values mean big landlord returns

Category: Buy To Let

Updated: 18/07/2014
First Published: 18/07/2014

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 It is now over 6 months old so the content may be out of date.

Landlords have seen total returns on their property investments reach their highest level in four years, after the value of the homes that they own soared.

Total annual returns on the average rental property reached 11.8% in the 12 months to June, according to the latest Buy-to-Let Index from LSL Property Services.

The figure is up from 5.5% a year ago, and is also the highest level seen since June 2010.

However, with rents themselves only slightly higher than a year ago, it is rising property prices that have been the main driving force behind the stellar returns.

Rents have increased by just 1.4% since June 2013, to an average of £747.

This in turn has contributed to a small drop in the average gross rental yield, to 5.1%, down 0.3% since June 2013.

However, once the value of the rental properties is taken into account, the total return enjoyed by landlords has grown, and could soon get even bigger.

Indeed, according to the report, if rental property prices continue to rise at the same pace as over the last three months, the average buy-to-let investor in England and Wales could expect to make a total annual return of 13.4% over the next 12 months, equivalent to £23,718 per property.

"Rental yields are solid and remain very tempting by historical standards, while capital accumulation provides a very big cherry on the cake," said David Brown, commercial director of LSL Property Services. "Landlords have noticed these incentives, and this has helped to bring a good number of new properties into the lettings market.

"Potential returns will remain just as strong as tenant demand seems set to only rise further."

Of course, a vital part of maintaining profitability as a landlord will be securing the right mortgage deal. You don't want your rental income to barely cover your outgoings, making this an essential part of portfolio planning. Luckily there are a lot of deals to choose from at the moment, which should make it easier to find the rate (and therefore the repayments) that will suit your budget.

Finding the right deal could be the first step on the path to becoming a professional, profitable landlord, free to enjoy the growing returns that are on offer in the sector.

What Next?

Compare the best buy-to-let mortgages in our best buy charts

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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