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Landlords not assessing true cost of BTL
This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
A growing number of buy-to-let landlords are not considering the true cost of their outgoings when calculating the profitability of new or existing investments.
Additionally, over 50% fail to consider the cost of any repairs, according to a report from specialist buy-to-let business Platinum Property Partners.
Overestimating
The study from Platinum estimates that the gross average cost of a buy-to-let property, when factors such as letting agent fees, repairs and mortgage interest are included, amounts to £8, 359 per annum.[1]
Platinum believes that landlords could be overestimating their returns by as much as 50%. The firm believes that the most accurate way of to gauge performance of an investment was to use either a return on investment or return on equity. These methods factor in gross profit, overall capital gain and all associated costs of maintaining the property.
Furthermore, the study revealed that some landlords do not factor in void periods when assessing their overall returns. Despite 60% of landlords facing a void period each year, the study suggests that only 12% take this into account when collating their figures.[2]
Landlords not assessing true cost of BTL
Hot Ticket
Steve Bolton, founder of Platinum, believes that the buy-to-let market remains a, ‘hot ticket,’ for, ‘budding landlords looking to generate an income and good level of capital growth from rental property.’ He feels that this is particularly the case, ‘now that the new pension freedoms have opened the gates to alternative financial plans for retirement.’[3]
Bolton went on to warn that, ‘becoming a landlord isn’t a walk in the park,’ and that, ‘running a successful portfolio takes continued investments of time and money.’ He went on to express his concern at growing number of landlords who are seemingly, ‘burying their heads in the sands,’ and who are ultimately, ‘in the dark about the true value of the returns.’[4]
[1-4] http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11568218/Landlords-underestimate-real-8359-cost-of-buy-to-let.html
