Investors rejoice – rising capital appreciation sees…

Initial start-up costs

For those new to the buy-to-let business, there are some upfront costs to consider when investing. Most notable being the mortgage deposit required – which on average 25% for a property to let – works out to £64,750 on the current average buy-to-let price of £259,000.

There’s also the inflated cost of stamp duty on a residential purchase, averaging £10,720 on the average rental property, with agency fees such as tenant search fees (£1,277 £) and registration of rental deposit (£40) bringing the total cost of this initial investment to £76,787.

Ongoing charges

But once your rental investment is operational, what is its profitability in the current market?

The largest ongoing cost associated with a buy-to-let is the annual interest rate paid on a mortgage, which equates to £8,159 on the average buy-to-let purchase. Annual maintenance costs also average £2,590, as well as £1,532 per year in agency management fees.

Then there are the lower costs associated with a buy-to-let, including cancellation periods (£700) and landlord’s insurance, that total coming to £13,150 per year.

Returns purchase-rental

In contrast to outbound costs, the average buy-to-let is estimated at £12.68 per year in rental income, a return of 4.93%. This means the average landlord actually suffers a loss of nearly £400 when comparing rental income to the ongoing costs of owning a rental property.

However, over the past decade the average rate of capital appreciation for a rental property has stood at 6.45%, which means an increase in property value of £16,693 per year. .

Rentd claims this level of capital appreciation increases the annual return on investment to £16,311, considerably higher than the same total return of £6,220 in 2019 and £5,150 in 2020.

Ahmed Gamal, Founder and Managing Director of Rentd, says fine-tuning your portfolio will ensure you cover the ongoing costs required while maximizing your profit margins.

“For many, this means investing in areas with above-average rental yields, or high-demand city centers that offer less chance of long empty periods, while negotiating with their agent over fees to maintain ongoing costs. at least,” he explains.

“Even still, the running costs of the average buy-to-let are likely to eclipse the annual rate of rental income and the real bright side of the sector in recent years has been the high rates of capital appreciation seen on the portfolio of an investor.”

Gamal concludes: “We don’t believe this should be the case and removing unnecessary rental management costs has been Rentd’s mission from day one.”

“By securing tenants, reducing cancellation periods, arranging viewings, performing reference checks, sorting through rental agreements, deposits, current rent and more, we have reduced the time and the money required of an owner so that he can maximize the financial prosperity of his portfolio property.”