Landlords enjoyed 7.6% annual return on their investments by the end of 2009 says, LSL Property Services. In 2008, by contrast, landlords would have typically lost 8.8% even after allowing for rental income.

David Brown, Commercial Director, said: "Despite the worst recession in living memory and despite house prices continuing to fall for the first few months of 2009, investment returns in buy to let were very respectable. 

"The £12,700 the average landlord made on a rented property during the year recouped most of the losses in the housing crash of 2008. Brave landlords who added to their portfolios will be celebrating an excellent year."

The trend in prices continues to be favourable with property rising in value 0.4% in December last year with rents up too (+0.2%).

Yields remain well above the 4.2% low point during the peak of the housing market at the end of 2007, when interest rates were far higher than today.

If house prices continue to rise at the current rate of 0.4% per month, equivalent to 4.9% for the full year (see last Blog & News 'Property Growth or Property Collapse 2010?'), a landlord will typically make a total return of £16,000 in 2010, equivalent to 9.8% yield.

Brown concludes: "This year is likely to be an interesting one for the buy-to-let market. The proposed introduction of regulation should help filter out unscrupulous mortgage advisers which will be positive for the sector, particularly for inexperienced landlords. 

"The downturn has already pushed many of the short-term speculators out of the market too. Buy-to-let is an essential part of our housing market - we need well capitalised, experienced, professional landlords. With returns rising, they can once again look forward to investing more in the sector to meet our housing needs."

What We Say ~ Brown's comments is another example of confidence in a rising market for 2010.  

We have always recommended three properties are acquired by a new landlord in their portfolio as soon as possible.  This dramatically reduces the risk of a void period of tenancy with the landlord having to find the mortgage payments on a single property.  It is unlikely three properties will be void simultaneously.  Once the cornerstone of a portfolio has been laid, adding suitable property at a steady rate should establish a good level of excess rental income above that needed to service loans, settle agent fees and maintain each property. 

For example a £100,000, 3-bed, house puchased 25% *BMV for £75,000 would produce £200+pcm excess rent over costs.  Five such properties would produce £1,000pm; ten properties, £2,000pm.  

Without mortgages however, five properties produce £2,500pm before running costs and income tax; ten properties, £5,000pm: quite useful money in retirement. PLUS of course, assuming 5%pa growth, your original purchase investment would double in value every 9-years!

As a tactic, we recommend every landlord aims for at least 10 good properties in their portfolio.  This allows the option of selling earlier acquisitions to settle the total mortgage debt at a time when you want to enjoy unencimbered rental incomes, retirement for example.  

Do call us to discuss this in more detail if you wish.  

 

*Remember, our typical cash investment to you is between £5-9,000. 

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