Buy-to-let landlords in for the long haul

A quarter of all buy-to-let landlords entered the market in the last twelve months, the latest quarterly Association of Residential Letting Agents Review and Index of the Private Rented Sector has revealed.

The research has been supported by the ARLA panel of mortgage lenders, who are: Birmingham Midshires, GMAC Residential Funding, NatWest Mortgage Services, Paragon Mortgages and The Mortgage Business.

The findings shows that nearly six out of 10 investor landlords said that they expect to acquire further property in the coming year.

The average length of time in the rental market for most investors is over five years, and only 1.5% of all these would consider selling if house prices should fall.

Residential property investors remain evenly split – 44% each between those wanting to achieve a combined yield from rental income and capital appreciation and those aiming to create a nest egg for their long-term future.

Only one in 12 investors became residential landlords solely for theincome stream.

For the last quarter, the annual rate of return, including both capital gain and rental yield, for residential property investments purchased outright averaged 11.21%.

For property investment made with the help of a buy-to-let mortgage, the average annual rate was 22.7%.

Well over half of all buy-to-let landlords report that they are achieving tenancies that continue for between 10 and 18 months.

One in seven report that the average length of tenancy is over two years while one in eight report that the average stay is between six and nine months.

These reported tenancy periods are all irrespective of the initial term agreed.

Despite fears that some of the new regulations for the private rented sector would deter investors, only 4% of the buy-to-let landlords questioned expect to be affected by the mandatory licensing for houses in multiple occupation, which comes into force next month.

Adrian Turner, chief executive of ARLA, says: “We have been anxious to ensure that the private rented sector as a whole understands the new regulatory regime.

“It is clear that the typical buy-to-let landlord is not unduly worried by HMO regulation, as the competitive benefits of providing their tenants with well maintained good quality property are obvious.

“This is contrary to some fears expressed when the new licensing regime was first proposed.”