It’s a tough time to be a landlord, with profits shrinking faster than a shrinking violet. A new study shows that the average landlord is now pocketing a staggering £4,000 less per year than they were just a few years ago, according to personal finance site Finder.
Here’s the lowdown:
- 2020: The average landlord with a buy-to-let mortgage on a property worth £230,318 was making around £9,309 in profit per year.
- 2024: That profit has plummeted to just £5,087, a 45% drop.
This is a massive blow to any landlord’s bottom line, and it’s largely due to:
- Rising interest rates: These have made mortgages more expensive, eating into your profit margin. The average 2-year buy-to-let mortgage is currently at a rate of 4.73%.
- Soaring house prices: The average house price has climbed to £281,373, making it harder to get a good return on your investment.
What This Means for Landlords
This is a real wake-up call for any landlord. The gravy train has come to a screeching halt. You’re going to have to work harder to make a decent return on your investment.
What’s Next for the Rental Market?
Liz Edwards, a money expert from Finder, warns that this shrinking profit margin is already having a negative impact on the rental market.
- Rent inflation: Landlords are passing on those higher costs to renters, with rents rising by a staggering 9.2% in March this year.
- Fewer options for renters: There are fewer rental properties available, making it harder to find a place to live.
This is a worrying trend, and Edwards is calling for the government to step in and address the “rental crisis” head-on.
The Bottom Line
The buy-to-let market is no longer the cash cow it once was. Landlords need to be aware of these challenges and adjust their strategies accordingly. This could mean:
- Looking for better deals on mortgages: Shop around to find the best rates.
- Raising rents: This can be tricky, but may be necessary to offset rising costs.
- Looking for alternative investments: There may be other options that are more profitable.
The days of easy profits in the buy-to-let market are gone. But with careful planning and a bit of hard work, you can still make a decent return on your investment.