There have been dozens of reports of late stating that landlords have never had it so good. The buy to let market is booming and in some areas tenants are queuing up around the block for desirable properties. So on the face of it, the financial returns for landlords appear to be very good (some studies cite landlord returns of around 7% in the most sought after areas). However, the Landlords and Mortgages report recently published by YouGov has suggested that the figures are over inflated and the true situation is a lot less rosy.
Landlords and Mortgages Report
The authors of the report state that they believe total returns for UK landlords are in decline. They say that landlords’ returns were on average 5% between 2002 and 2006, but they have since fallen to 2.5%. The main reason for this, they say, is that a lot of landlords don’t take their costs into account when working out their profit margin.
Landlord Costs
There are several key costs associated with being a landlord, including mortgage interest payments and letting agency fees. These costs directly affect profit margins, so if you fail to take them into account, your rental returns will be falsely inflated. According to the report, although 93% of landlords allowed for mortgage interest payments, only 46% allowed for miscellaneous property management expenses.
Despite this, the buy to let market continues to grow, so there are plenty of landlords who see the rental sector as a good place for their cash, which is hardly surprising given the poor return offered by savings accounts.
