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In July 2018, we asked 1,002 buy-to-let investors what they planned to do with their buy-to-let portfolio over the next five years. 44% said they planned to sell some or all of their portfolio. That’s a big change, and suggests that more challenging market conditions – such as increased stamp duty, abolition of the wear and tear allowance and landlords no longer being able to claim tax relief on mortgage interest – are already spreading uncertainty among investors.
Over the next five years, I plan to...
| Value of property at purchase | £475,000 |
| Value of property at sale | £590,812 |
| Rental income over eight years | £174,202 |
| Total income from rent and property sale | £290,014 |
| Associated costs, taking into account inflation | |
|---|---|
| Cost of purchase | -£1,714 |
| Arrangement fees | -£3,798 |
| Initial fit out | -£3,798 |
| Mortgage interest paid | -£127,626 |
| Estate agency management fees | -£29,851 |
| Stamp duty | -£31,986 |
| Income tax | -£33,402 |
| Wear & tear | -£9,708 |
| Cost of sale | -£10,124 |
| Capital gains tax | -£34,209 |
| Early Repayment Charge on mortgage payments | -£3,798 |
61% of landlords in our survey said they underestimated the costs associated with buy-to-let property. Over a third of these cited the unexpected cost of repairs, 28% emergency one-off costs such as boiler repair or burst pipes, 27% insurance and professional cleaning and 25% the cost of gaps between tenancies.
According to Octopus research, a London house bought for £475,000 today would have to be sold for £590,000 eight years later, just to break even in real terms. That’s £115,000 of capital growth – not to mention all the rental income earned over eight years – which evaporates to zero after all those hidden costs.
There’s still money to be made in buy-to-let, but geography is increasingly becoming the deciding factor in whether you’ll find yourself in the red or black.
Keen on property, but don’t want the hassle of being a landlord? Property-backed peer-to-peer lending allows people to co-invest in loans that are secured against property and target a share of the interest.
Remember, your capital is at risk and you might get back less than you put in. Peer-to-peer investments aren’t covered by the Financial Services Compensation Scheme.
The investor's perspective
“Property-backed peer-to-peer lending gave me the opportunity to diversify my investments, but retain a foot in the door of an asset class I have confidence in.”
Read full interviewBe aware that your capital is at risk, and it’s possible you’ll get back less than you initially put in. Instant access not guaranteed.
Location is fundamental to any property investment. But for buy-to-let investors, it has become more important than ever as a swathe of changes are shifting the dynamics of a historically highly-profitable market...
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Anyone invested in the buy-to-let market knows it is changing, as taxes go up and regulation grows. But what are landlords planning to do as a result?
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We’ve seen a lot of new regulations introduced recently, geared around shaking up Britain’s property investment sector.
Some of which have no doubt already been the cause of a few headaches for buy-to-let investors. And with even more rules set to come into force over the next couple of years, it’s a lot to get your head around.
So, here’s our overview of all the changes that new and existing landlords need to know about.
