Property investment in the UK is still one of the most effective and popular ways to make returns from your money, and a new study has revealed the true extent of how much buy-to-let landlords can make.
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Over the space of 25 years, a typical buy-to-let property could make a net profit of a huge £265,500, adjusted to £162,000 after inflation, which equates to £6,500 per property per year. This is according to the latest research by Kent Reliance, who have revealed that despite all the regulatory and tax changes affecting landlords, returns are still set to be huge for the average long-term investor.
The figure is calculated after taking into account factors including mortgage payments, taxes and maintenance, based on an average property price of £246,500, with a 30% deposit, growing in value to £516,000 over 25 years. It assumes real-term house value and rental value gains of 1% per year, generating an average rental income of £369,495 over the 25-year period which would cover costs and leave the landlord with a profit of £65,000 even without selling the property.
Committed investors will make the biggest gains
John Eastgate, sales and marketing director at OneSavings Bank, said: “Regulatory and taxation changes have altered the market dynamic, reducing its attractiveness to amateur landlords, and increasing the tax bills of higher-rate investors.
“In spite of rising costs there are still healthy returns to be found in property for committed investors. However, the days of speculation are gone. It is a long-term business endeavour, requiring commitment and expertise.”
Kent Reliance also revealed that over the course of 25 years, the average tax paid by a basic-rate landlord will amount to around £99,600, including more than £60,000 in capital gains tax (presuming they sell the property), £29,000 in income tax and almost £10,000 in stamp duty. Mortgage costs are the biggest expenditure for most, amounting to an average £157,000 over the time period, while maintenance and running costs add up to £72,000 per property for the average landlord.
While there are significant costs attached to buy-to-let property investment, the figures reveal that there are huge profits to be made by those who are in it for the long run.
