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Returns hit 22% on mortgage-linked BTLs

Returns on buy-to-let properties bought with mortgages have risen due to lower interest rates while returns on cash-bought BTL properties have dropped slightly, according to figures from the Association of Residential Letting Agents.

Cash-bought BTL returns have fallen to 9.45 per cent from 9.53 per cent while BTL returns linked to mortgages have risen to 19.06 per cent from 18.89 per cent for the three months to February due to falling interest rates.

Regional returns have remained constant over the last few months. The only area to show any notable change is the Midlands, where cash-purchase returns rose to 10.24 per cent and to 21.15 per cent for a mortgage-backed investment.

Returns range from a low of 8.95 per cent from prime central London locations to a high of 10.83 per cent in the North-west for cash. If the investment is mortgage-linked, this rises to 17.32 per cent in prime central London and to 22.34 per cent in the North-west.

Data is drawn from more than 500 letting agents and is intended to allow direct comparisons between investments in residential property and other investment vehicles. The calculations include achieved rents, mortgage costs, capital appreciation and the costs of buying and selling but Arla emphasises the importance of taking detailed advice before entering the market.

Arla chairman John Crossley says: “The typical buy-to-let investor, be it in a large or small way, goes about buy to let in a very professional manner. From all the anecdotal evidence we receive, this is how potential and experienced investors go about making their investment decisions.”

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