Profits achievable in Buy-to-let - Fact or Fiction ?

Profits achievable in Buy-to-let for Dunstable Landlords – Fact or Fiction ?

It is estimated that there are 4.8 million privately rented homes in Britain, up from just 2.5 million in 2002 and it is forecast that around 20% of all households in the UK will be renting a property by 2016 resulting in a requirement for an additional 1.1 million rental homes, therefore there is growing demand for new buy-to-let landlords to enter the market and existing landlords to expand their portfolios.

But it is believed that potential new landlords are holding back from investing because of perceived low yields, shortage in buy-to-let mortgage availability and cynicism over profits that can generated by buy-to-let property in the current market.

However, rising rents and lower capital values are giving a much better return on cash than the banks. So in real terms, can a buy-to-let investment give you a tidy profit if you buy now?

When it comes evaluating if a property in Dunstable, Houghton Regis or Leighton Buzzard is a good investment investors have to look at the longer, rather than shorter term and the potential profits from buy-to-let investments are largely misunderstood. Getting the right property, in the right location and at the right price with the right financial structure is key to making a healthy profit from the start.

A Buy-to-let property bought in Dunstable at the peak in 2007 may not be showing a good return yet if it’s outside London. However, a property bought in 2003, will should be showing a healthy increase in capital value by now.

There is also the cashflow side of the investment to consider when looking at returns. Rents have risen over recent years and interest rates are low providing the potential, depending on finance structure, for greater monthly returns.

Property has historically doubled in value every 7-10 years and has done now for over half a century, as it did from 2000 – 2010. During this period the market experienced what was described as ‘the 2007 property crash’. In the last 10 years from 2002 – 2012, properties have seen around 50% increase in value across the UK.

This could suggest that in the next 10 years we are going to see property values rise by at least 50% again if not more than double that figure, as per the historical 7-10 year double in value timescale. The 20 year rolling cycle of prices shows an increase in property annually averaging each year by 7% over the worst period since 1952 to 66% a year at best (1989-2009)

Profits from buy-to-let can be even more substantial given the capital growth aspect is not the only way you can see a return. Profit can also be made at the point of purchase, through rental returns and by adding value to a property to name a few.

Research from Rightmove indicates that almost two-thirds of tenants are expecting their rents to rise over the next year and over the last year rent increases have averaged 5.2%. Rental growth is forecast at 20% over the next five years with 3% in 2012

Yields currently range from 7.8% for the top performing 10% of properties to 4.4% for the bottom 10%, with the highest yields achieved for the lowest value properties.

If you are an existing Landlord looking to expand your portfolio or you are considering investing in a Buy-to-Let property come and talk to the team at Belvoir Dunstable and read our tips on Buy-to-Let.

With no obligation, we will advise you on the process involved in renting a property and research the areas you are looking at to evaluate the potential rental yield of your investment.