Why Buy-To-Let Needs Long-Term Investment

Buy-to-Let (BTL) long-term investment is still a great bet for investors, potentially raising net profits of more than £265,500 on their property over the next 25 years.

In research delivered by One Savings Bank, it was calculated that around £160,000 could be seen in profit after inflation, although it also showed that higher-rate taxpayers will generate nearly 25% less than their basic-rate counterparts.

The amount of return is also heavily dependent on location. While it’s true that profits in London and the South East can be higher than the rest of the UK, it also requires a much higher initial investment and stamp duty can have much more of an impact on profitability. It’s vital to get a good grip on the current and future state of the market, both demand and the direction that the market is moving in needs to be considered.

Diversifying portfolios in affordable regional cities still appears to be the best bet for many investors, provided it’s a Buy-to-Let long-term investment and has a committed a strategy.

John Eastgate, sales and marketing director of One Savings Bank, believes the market is “undergoing a sea change”. He said:

“Regulatory and taxation changes have altered the market dynamic, reducing attractiveness to amateur landlords, and increasing the tax bills of high-rate investors. In spite of rising costs, there are still healthy returns to be found in property for committed investors.

“It is a long-term business endeavour, requiring commitment and expertise.”

Using the example of a 25-year investment, a basic tax-paying landlord with a standard 3% deposit (around £70,000) on a property would see net profits soar to around £265,500 after all costs. If you’re counting inflation over the same period, this represents a profit of £162,000 in today’s money.

A large proportion of the returns would come from capital growth, although the research showed that rental income would also provide significant returns, covering any potential expenditure.

General interest in long-term Buy-to-Let investment has reportedly wavered recently after government measures increased the amount of stamp duty payable on the property and the declining tax relief available to landlords on mortgage interest payments.

However, professional and seasoned investors know that BTL can still provide excellent financial returns and it is entirely viable, particularly with affordable properties in key locations.