Agent pleads with landlords to believe in buy to let

The director of a London lettings agency says buy to let landlords are entitled to feel downtrodden but claims it’s still worthwhile, financially. 

In an article for sister publication Landlord Today, Marc von Grundherr of Benham and Reeves says: “Let’s look at some facts. Not every landlord has a mortgage, in fact more than a third do not. Therefore increased interest rates affect some.

“Interest rates at 5.25% Bank base are not high by historic standards. The average rate over the last 100 years is - 5.25%. The majority of landlords are old enough to know this and so current borrowing rates are more ‘normal’ than ‘high’.

“House prices have increased by 54% in the past decade and by 152% since 2000. That’s +6% per annum in the latter case, a more than decent return. Rents are up 31% since 2014, an annual increase of 3%. Tenant demand is higher than ever.

“The number of new homes built are lagging way behind demand. The annual deficit is around 100,000 homes resulting in a ‘product’ that is at its most scarce in relative terms than ever before.

“Alan Sugar, Donald Trump, the Duke of Westminster, Ellen DeGeneres, Jeremy Renner, Arnold Schwazernegger, Robbie Fowler… famous names that have all made their fortunes through property, not just the business that they are better known for.”

Von Grundherr says these are “huge positives” for the private rental sector.

And he concludes: “Traditional analysis looks at yield as ‘the annual rent vs the value of the property today’ whereas many, many landlords have owned and held their portfolios for years and therefore today’s higher rents as a percentage of the original purchase price show ACTUAL yields at a far higher level. 

“Fact: Most landlords have been such for 10 years or more - and so a 5% annual yield today is actually 7% if the property has been owned since 2014 as most have.”