Posts with tag: buy-to-let returns

1,400% Returns Create 2m Buy-to-Let Landlords

Published On: April 14, 2015 at 11:08 am

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Buy-to-let landlords have achieved yields of around 1,400% since 1996, making it the best investment.

1,400% Returns Create 2m Buy-to-Let Landlords

1,400% Returns Create 2m Buy-to-Let Landlords

If someone put £1,000 into a rental property in 1996, it would have grown to £14,897 last year, revealed a report. This is six times the amount shares would have earned and over 14 times the return from leaving the money in a cash account.

These figures show how rewarding the property industry has been in the last two decades, even creating some multi-millionaire investors. However, campaigners who believe that buy-to-let landlords increase house prices and make it harder for first time buyers to get into the market, will be concerned by the findings.

Economists illustrate the incredible yields with someone buying a buy-to-let property at the end of 1996, when the average house cost £55,000, with a 75% loan-to-value (LTV) mortgage. The investor would have made a huge 1,390% profit on their money by 2014, in which time rents rose sharply and the average property price reached £189,000.

This would cause 16.2% growth annually, the research by Wriglesworth Consultancy for peer-to-peer lender Landbay found.

Comparatively, if £1,000 had been invested in commercial property, between 1996 and 2014 it would have risen to £4,494, in UK government bonds it would now be worth £3,329, and in UK shares to £3,119. Put into a cash account, the money would have been worth £1,959 last year.

 

The report says: “What this scenario helps to illustrate is how buy-to-let has not only provided very strong returns for average investors since 1996, but how it has enabled a cohort of ambitious investors to become seriously wealthy.”

It adds that strong property price growth and the chance to expand property portfolios “has allowed a new class of millionaires to emerge in a way that has generally not taken place with investors in the other asset classes we have considered.”1

Comparing returns

The following figures indicate how much £1,000 invested in 1996 would be worth now.1

Investment

 Worth

Return
Buy-to-let property £14,897 1,390%
Commercial property £4,494 349%
UK government bonds £3,329 233%
UK shares £3,119 212%
Cash account £1,959 96%

Buy-to-let has boomed since mortgage providers introduced specialist offers in 1996. There is now estimated to be 2m private landlords in Britain, owning almost one in five homes. Pension reforms launched last week, that allow over-55s to withdraw money from their retirement savings, have caused worries that buy-to-let will expand even further.

The Government predicts that private landlords will own one in three properties in 2032.

Halifax revealed recently that tenants are giving up their dreams of owning a home. Read more about it here: /tenants-give-homeownership-dream/.

Lending to buy-to-let landlords increased by 12% year-on-year in January, revealed the Council for Mortgage Lenders (CML). In the same period, the amount of loans offered to first time buyers dropped 14%, falling to the lowest monthly level for 21 months.1

1 http://www.dailymail.co.uk/news/article-3036279/Proof-buy-let-property-really-best-investment-1-400-returns-help-create-2million-private-landlords.html

 

Landlords Keen to Buy says Mortgage Lenders

Published On: May 21, 2014 at 9:31 am

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Categories: Landlord News

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A survey by a specialist property broker has revealed that 60% of buy-to-let landlords plan to increase their property portfolios in the next six months.

The study, conducted by Mortgages for Business, also shows that 95% of landlords are lending on their current portfolios.

Landlords Keen to Buy says Mortgage Lenders

Landlords Keen to Buy says Mortgage Lenders

The survey found that impressive yields, across a variety of investment property types, are causing the plans to expand, from the 251 property investor respondents.

According to the survey, investors wish for more diverse property portfolios, causing the prediction of a 29% rise in purchases of houses in multiple occupation (HMOs).

The amount of multi-unit freehold blocks to be bought is expected to increase by 19%, with semi-commercial and commercial property purchases also estimated to rise by 15%.

These predicted buys are on top of the 82% respondents claiming that they were also contemplating purchasing at least one ordinary buy-to-let property.

Furthermore, 45% of landlords said that they are considering remortgaging a property in the next three-to-six months.

David Whittaker, Managing Director of Mortgages for Business, explains: “With buy-to-let mortgage rates at historic lows, this strategy may well prove prudent in protecting them against future interest rate rises.

“Of those who are not looking to remortgage, we must surmise that some will be keen to hand onto their existing reversion rates for as long as possible. It will be interesting to see whether the situation changes as the year goes on. Accordingly, the next survey will include a question about recent remortgaging activity.”1

Just 3% of landlords stated that they are going to reduce the size of their portfolios in the next six months, a decrease from 6% six months ago.

The research also reveals a preference among landlords to choose five-year fixed rate agreements, with 34% of investors doing do.

The number of respondents suggesting that lenders could do more to help property investors has dropped by 10% from last October, to 58% in the latest survey.

Competitive pricing and a rising number of products available are thought to be the reasons behind this increase in buyer confidence.

1 http://www.landlordtoday.co.uk/news_features/Landlords-keen-to-buy-says-Mortgages-For-Business

BTL Returns Top All Asset Classes

Published On: April 26, 2014 at 10:40 am

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Categories: Landlord News

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A recent survey has discovered that buy-to-let investments have performed better than all other mainstream investments over the last 18 years. During this period, landlords have enjoyed yearly returns in excess of 16%.[1]

Investigation

Economist Rob Thomas, working on behalf of The Telegraph, recently conducted an investigation to see how much a starting deposit of £1,000 invested into various asset classes in 1996 would be worth in the present day. Thomas chose the final three months of 1996 as his starting point as this was when buy-to-let mortgages were introduced.

Thomas found that every £1,000 invested into a standard buy-to-let property with a 75% loan-to-value (LTV) mortgage yielded £13,048 by the end of 2013. This gave an average annual yield of around 16%.[1]

Rent is the Next Big Asset Class

Rent is the Next Big Asset Class

He also found that a cash buyer would have seen their original £1,000 improve to £4,791 by the end of 2013, a compound yearly return of 9.7%.[1]

Commercial property

The same investigation concluded that depositing the same amount into UK commercial property in 1996 would have led to a return £3,654. Similarly, if the money was deposited into UK equities, each £1,000 would now be worth £3,082. UK government bonds would have risen to £2,924.[1]

Future

Looking to the future, the report suggested that buy-to-let yields would continue to outdo other asset classes over the next ten years. However, with interest rates widely expected to rise, industry experts are questioning if now is the correct time to invest in the buy-to-let market.

Concerns are rising that some buy-to-let investors could see their rental income fall below their mortgage costs by the year 2017, if, as estimated, interest rates rise to 3%. The concern is predominantly felt by landlords who invested late in the market, or have borrowed against existing properties in their portfolio.

[1] http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/10788736/Buy-to-let-returns-top-allother-asset-classes.html

 

 

 

 

Landlords Have Unrealistic Expectations of Returns

Published On: July 15, 2013 at 10:27 am

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Categories: Finance News

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Data taken from YouGov’s Landlords and Mortgages 2013 report suggests that landlords are expecting unrealistic returns from their buy-to-let property.

Lenders have suggested that landlords newly entering the buy-to-let market are more focused on potential long-term returns of a property than before the financial crisis. Critics argue however that YouGov’s findings suggest many landlords are not taking into account a range of necessary payments when calculating their figures.

Decline?

The report indicates that landlords’ total returns are in decline, despite rising rental prices. Between 2002-2006, landlords’ returns were between 4%-6%. However, the findings suggest that they are now between just 1%-4%.[1]

A possible reason for this reported decline is landlords overlooking many mandatory costs. The data shows that 93% consider mortgage interest payments, but only 68% take account of agency fees, and 46% budget for other management expenses.[1]

Buy-to-let in general has continued its remarkable growth, with 1.5m landlords making up 13% of total lending.[1]

Landlords Have Unrealistic Expectations of Returns

Landlords Have Unrealistic Expectations of Returns

 

 

Landlords

The Strategic Society Centre recently released a report entitled Understanding Landlords, collated in order to ascertain the profile of the everyday landlord. The think tank found that “private rented sector landlords have, on average, a more advantaged background,” with 40% of 45-64 year old landlords having a degree or higher qualification.[1]

There are concerns that the well educated private sector are driving up prices, making it increasingly difficult for young people to purchase property.

Limits

The findings of the YouGov report have called for limits on landlord activity. Campaigners are asking for prohibition surrounding the purchase of new build properties with buy-to-let loans. Pricedout.org.uk, a website campaigning on behalf of young would-be homeowners, has called for a landlord’s right to offset mortgage interest against tax to be stopped.

However, Richard Lambert from the National Landlords Association (NLA), has slammed the Strategic Society Centre’s report, coining it “Misunderstanding Landlords.” Lambert suggests: “The authors just want to prove their preconception that the growth of the sector is the cause of problems in the market rather than a consequence of them.”[1]

Lambert then asks: “Will anyone be surprised to learn that those who invest in property are wealthier than those who have not been able to buy?” before continuing, “claiming that the private rented sector represents a transfer of wealth from tenants to landlords is like saying that pubs represent a transfer of wealth from drinkers to publicans.”[1]

[1] http://www.landlordexpert.co.uk/2013/07/15/landlords-have-unrealistic-expectations-of-property-returns-claims-new-report/