A leading market peer has stated that traditional measures of gauging buy-to-let success are changing.
Property expert Kate Faulkner suggests that rental yields are not necessarily a key indicator of a successful investment.
Appreciation
Faulkner believes that falling capital appreciation and small rent rises in many regions have led many yields to improve.
However, she feels that other factors and obstacles obstructing landlords making profits are not being taken into account. These include costs to landlords covering:
- health and safety
- energy efficiency
- reduced tax benefits
- phased cut in landlords mortgage interest tax relief
Rental yields might not be a measure of success
Writing in her latest Propertychecklists newsletter to clients, Faulkner said: ‘Although yields are a useful measure when buying, they won’t help landlords understand the impact of lower profitability levels moving forward. It is essential that landlords who have posted their tax returns now take these to a property tax expert to understand the future viability of their investment and to know if they are likely to have to put money in.’[1]
Warning
In addition, Faulkner issued a warning for investors in the North of England. She said that those taking advantage of low purchase prices and better capital yields should future-proof their profitability by making sure capital growth is secure when they buy, in comparison to relying on natural price growth to deliver their returns.
[1] https://www.lettingagenttoday.co.uk/breaking-news/2016/11/yield-no-longer-the-key-measure-of-buy-to-let-profitability-says-lettings-expert