A recent report by Paragon Mortgages revealed that buy to let investors have made an average of 16.3% per year since 1996.
The data is also impressive because it shows buy-to-let as the most lucrative investment class of them all.
According to Paragon, £1,000 invested in 1996, when landlord mortgages first came about, would have grown to be £13,048 today. These profits have been assisted by steadily rising house prices and a buoyant rental market.
While some may think of property investment as potentially risky, compared to shares, bonds and savings, it has proven far more lucrative, with those asset classes delivering 6.8%, 6.5% and 4% respectively.
Although some fear that rising house prices will make a dent in the profits of buy-to-let investors, the Paragon report suggests that over the next ten years landlords are still set to make 11% per annum.
The government’s Help to Buy scheme is one of the key reasons why there have been so many new landlords entering the sector, which saw a lull during the financial crisis of 2008-2012.
While access to funding for buying a personal home is starting to get more difficult following the introduction of affordability rules, buy to let investors may find even more potential properties open to them – as these new rules do not apply to them. Buy to let landlords are seen as business-setups rather than domestic homebuyers.
According to Paragon’s data, one-in-seven mortgages go to buy to let investors – many of our buy to let insurance customers among them.