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According to analysis by specialist lender Octane Capital, the average yield on properties for sale has risen from 4.9% to 5.8% over the past two years.
Rental income has increased by 19% over the past two years and now totals £15,144 per year.
Initial start-up costs associated with buy-sell investments have decreased by -17% from a total of £12,037 in 2021-22 to £9,952 now.
However, operating costs have increased by 18% to £15,592 per year, mainly due to higher mortgage rates.
Jonathan Samuels, CEO of Octane Capital, said: “The average landlord has benefited from a very healthy level of rental income growth in recent years, so while the level of property value appreciation may have slowed, it still provides a return on both sides of the investment. Despite the current volatile market environment, the company continues to generate healthy returns.
“Of course, higher running costs, particularly due to rising mortgage rates, have reduced the overall net profit we have seen to date. However, given the current economic climate and the real estate market difficulties we have overcome in recent months, Given the storm of certainty, it’s safe to say that this drop in net income is fairly modest.
“In the current market, there are still many opportunities for buy-to-let investors to reduce borrowing costs, and working with a specialist lender is the best way to secure these.
“It is important to note that the government’s insistence on digitizing tax adds further costs to consider, but initial costs of £350 and ongoing costs of around £110 reduce the appetite for investment. It is unlikely that you will.
“The government is also trying to lure more landlords away from the sector by lowering capital gains tax, which our research shows is slightly lower today compared to a few years ago, but remains profitable. It shows that this is an initiative.”
The main downside for investors is that capital appreciation fell by -6% over the year to £15,728.
This results in returns on an annual basis of -6% year-on-year to £15,280, down from £16,285 per year in capital appreciation and rental income, taking into account the ongoing costs associated with buying and selling investments.