Research by One Savings Bank has revealed that the average net profits from buy to let property is £265,500 over a 25-year period. When inflation is taken into account, this equals £162,000. Recent tax changes have resulted in higher rate taxpayers receiving less tax relief on commercial mortgage interest payments, and this can reduce net profits by around a quarter.
Returns vary between regions with London landlords achieving £307,000 profit over 25 years.
John Eastgate of One Saving Bank said that buy to let investing should be seen as a long-term investment. He explained that the secret to a successful buy to let business was to see it as a “a long-term business endeavour, requiring commitment and expertise. Investors must be prepared to undertake business and tax planning, understand the risks as well as the rewards, and, most importantly, the responsibilities they have towards their tenants.”
Rents can make a profit after expenses have been paid, but a portion of returns come from capital growth.
Government changes that increased stamp duty and reduced tax relief for buy to let landlords may have discouraged some people from buy to let investing. In 2015 the total invested in buy to let property was £25 billion. This fell to £5 billion in 2017, but these figures show that buy to let investing still makes financial sense when viewed as a long-term investment. There are many commercial mortgage deals available to finance buy to let purchases.