21 years of buy to let generates £1.2 million portfolios for landlords
Investors who bought property in 1996 could be celebrating with £1.2 million property portfolios as the sector celebrates its 21st birthday this year. Over the past two decades, landlords could have seen their buy to let returns increase by as much as 1,131%.
Our internal research found that landlords who invested £100,000 into UK property 21 years ago, could now have a portfolio worth £1,230,644 – more than 11 times the value originally invested.
After buy to let mortgages were officially introduced onto the mainstream market in Q3 1996, landlords have been able to leverage their cash and spread capital across more than one property. A buoyant property market has resulted in a significant level of capital growth which has vastly increased the value of landlord’s assets across the UK.
Over the last 21 years, average house prices have increased by 282.66%, resulting in a lucrative investment for landlords. This far surpasses returns derived from ISA’s, stocks and shares with both capital growth and rental returns taken into consideration.
Graham Davidson, managing director of Sequre Property Investment, comments on how investors have been profiting greatly from buy to let since 1996:
“Over the past 21 years, the property market has churned through it’s typical cycle and even after suffering the effects of the 2008 crash, landlords have still seen over 1,000% returns. Property is an asset that can perform well in both the short and long term, and despite the tax changes and additional economic factors, we are still yet to see another investment type in the UK that can offer the same level of returns that buy to let can.”
“It’s clear that landlords are still reaping the benefits of a thriving property market. These types of returns are more attainable to the average investor than some might think – by putting savings into property as opposed to leaving them sat in the bank gaining very little, investors can see their returns double in the space of a few years.”
Sequre has provided the following breakdown, representative of a typical leveraging scenario to create a profitable property portfolio:
- £100,000 cash – bought four properties worth £100,000 each - using buy to let mortgages, a £25% deposit will be put down on each one (utilising 75% LTV buy to let mortgage) = Purchasing £400,000 worth of property with £100,000.
- Each property purchased in 1996 is now worth £382,661* - this results in a combined portfolio worth £1,230,644 (taking away combined interest only mortgage of £300,000 to own the properties outright.)
*increase of 282.66% based on UK house price increase over the last 21 years.
He continues: “Bearing in mind that that there would have also been a substantial income achieved from the increase in rental payments over this 21 year period, there are still options available to extend profits further. Taking the example provided, an investor could sell one property, pay the capital gains tax and pay off the remaining mortgage. They’d still own over £1.2 million worth of property outright and continue to collect the rental income from the remaining three properties, estimated at around £70,000 per annum – a solid investment strategy that could provide a strong second income, fund retirement or be passed on to children for future generations to benefit from the investment.”