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Revealed: How much money landlords can really make

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12/09/2019
The true cost of a being a landlord might be greater than you think
Revealed: How much money landlords can really make

The profitability of the buy-to-let sector is being squeezed due to the hidden costs of being a landlord, said letting platform Howsy.

It noted this lack of profit is exacerbated by added costs from Government as a result of tax changes.

The average landlord is left with just £2,000 from an average annual return of £13,000, once the hidden costs of being a landlord are paid for.

Crippling costs

The research shows that the initial start-up costs of Stamp Duty Tax (£6,663) and agency fees to find a tenant (£811) cost the average landlord £7,475 and that’s before the ongoing costs are considered.

According to a recent survey, the average landlord experiences 23.75 days of void periods a year during a tenancy, an average of £535 a year.

What’s more, 73% of landlords buy with a mortgage and will pay an average £6,921 interest each year. Couple these costs with an additional £1,622 in agency management fees, an average annual maintenance and repair bill of £2,077 and you’re talking £11,147 per year.

What’s left?

Based on an average annual rental income of £8,112 divided by the average buy-to-let property cost of £183,278, the average yield available is 4.4% – that’s an annual sum of £8,119.

Over the last decade, the capital appreciation of bricks and mortar has also averaged an increase of 2.85% a year, £5,223 in monetary terms. That means landlords are seeing a total average return of £13,343 on their investment.

However, leaving start-up costs and unforeseen events out of the equation, once the average UK landlord has paid the ongoing costs associated with a buy-to-let property each year, they’re left with a profit of just £2,140.

Founder and CEO of Howsy, Calum Brannan, said: “Investing in an area with higher yield is one way to increase profit but you can also squeeze every last penny out of your property by shopping around on things like mortgage rates and which agent to use.

“Today, the sector is ripe with alternative platforms and so you don’t have to be at the mercy of the traditional letting agent and the high fees they charge.

“The new age of letting platform not only costs less where fees are concerned but many platforms, like Howsy, are now offering comprehensive packages designed with security and peace of mind as the motivation, not profit.”

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