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21 years of BTL generates £1.2m portfolios for landlords

Investors could have seen their buy-to-let (BTL) returns increase by as much as 1,131% over the past two decades, according to Sequre Property Investment.

Research from the BTL specialist found that landlords could now have a portfolio worth £1,230,644 if they invested £100,000 into UK property 21 years ago – more than 11 times the value initially invested.

Graham Davidson, managing director of Sequre Property Investment, commented on investors’ successful profiting over the last two decades, saying that landlords are still reaping the benefits of a thriving property market.

“Over the past 21 years, the property market has churned through its typical cycle and even after suffering the effects of the 2008 crash, landlords have still seen over 1,000% returns,” he said.

“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.”

He continued: “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.”

After the mainstream market was officially introduced to BTL mortgages in 1996, landlords were able to spread capital across more than one property. Due to high levels of activity in the property market, there was a significant level of capital growth which increased the value of landlords’ assets across the UK.

Now, 21 years later, the property market represents an even more profitable investment for landlords, with average house prises increasing by 282.66%. This exceeds returns derived from ISA’s and stocks and shares with both capital growth and rental returns taken into consideration.

Sequre provided a breakdown of a typical leveraging scenario to create a profitable property portfolio in both 1996 and 2017.

1996: £100,000 cash – bought four properties worth £100,000 each: using BTL mortgages, a £25% deposit will be put down on each one (utilising 75% LTV BTL mortgage) = Purchasing £400,000 worth of property with £100,000.

2017: 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.)

“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,” Davidson added.

“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.” 

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