The rate of return on the total cost of a buy-to-let investment averages at 9.52%, according to the Association of Residential Letting Agents (ARLA).
However, according to its second set of quarterly Indices of Rental Returns, return on a cash deposit of 25% of the total value of a buy-to-let property is likely to be 18.89%, down 0.25% on last quarter to the end of August.
‘This is a higher figure than buying outright as you are profiting from the lenders’ money as well. It is not intended as an advert for mortgage lenders but it is a fact of life with any business,’ said Malcolm Harrison, spokesman for ARLA.
These indices are based on data from a survey of ARLA members. The survey showed gross rental return on buy to let at 6.1%, down from 6.3% the previous quarter. New tenancies are up by 4% nationally on the last quarter, in central London by 6% and the rest of the South East down by 2%. The balance of supply and demand remains virtually unchanged since last quarter.
Harrison said: ‘We are trying to build a record of how buy to let compares to all other investment. There has been no real change in the market in the last quarter. The market would seem to be very stable at the moment, although it has ups and downs in local areas, giving all the more reason to talk to letting agents before doing anything.’