A severe lack of research and poor planning is preventing many buy-to-let investors from maximising their income according to Platinum Property Partners (PPP), the specialist buy-to-let business.

Research from PPP shows a quarter of buy-to-let investors sought no advice and carried out no research before making their property purchases. Less than one in five investors did a lot of research (18%).

Furthermore fewer than one (7%) in ten did any of the following: sought advice from experienced investors, consulted lawyers or accountants, and read a book written by an expert. Such inadequate planning and preparation will have significant ramifications on the investment potential of each buy-to-let property.

Steve Bolton, Founder and Chairman of Platinum Property Partners said: “As with any investment, extensive research and planning for buy-to-let investors is paramount. It is astounding how little thought and preparation many investors are giving before diving in and making such a substantial investment decision. Neglecting to spend a reasonable amount of time and energy to devise a strategy for your buy-to-let investment can prove costly.

“Research and advice is essential to help pinpoint the right type of property and identify the right locations to maximise income and in fact, whether this type of investment is right for you.

“It’s crucial that choices are made that reflect an individual’s own unique circumstances and goals, and are appropriate for the amount of investable capital available. We would therefore urge prospective investors to exhaust the plethora of resources available and consult experts before they make any hasty decisions.”  

What a difference 1% can make in buy-to-let

According to the Office of National Statistics (ONS), the average buy-to-let investor in the UK currently has a property portfolio of £650,000, while recent PPP research shows investors achieve an average gross yield of 5.6%.  If £650,000 was invested in property today and a consistent yield of 5.6% was achieved over fifteen years, a typical period to consider a property investment, then the investment would be worth in excess of £1.63 million by 2029.*

But, if the average investor increased their yield by just 1% – which could potentially be achieved by conducting thorough research on property location, seeking advice about income potential and reducing costs– the value of their investment would increase by £80,340 in the same fifteen year period through both income and capital growth.

Gross Yield Total Annual Return Value of £650,000 after 15 years Increase in return after 15 years
5.6% 6.3% £1,630,720
6.6% 6.7% £1,711,060 +£80,340

Annual Return = capital growth + income growth less costs divided by purchase price.

Steve Bolton added: “The fact that increasing one’s yield by a mere 1% can increase the value of an investment by over £80,000 in fifteen years goes to show how far good preparation can go. Taking a lacklustre approach could mean investors miss out hugely in the long run.

“Of course, buy-to-let properties are not one-size fits all products. Property types, location and tenants all play a crucial role in determining the potential returns on offer and this is not to be understated. In fact this is precisely why research and advice is so key to unlocking the full investment potential for each property.”

Honing in on HMO

A popular investment choice for those that carry out extensive research is the House in Multiple Occupation (HMO) model.

Amidst increasing signs from the Bank of England that a base rate rise is looming on the horizon and could come before the year is out, buy-to-let investors should take stock of how such a rise could dent their returns. Investing in the right HMO can be incredibly profitable, providing investors with a greater source of rental income than regular buy-to-let properties.

Steve Bolton concludes: “An increased rate of income from buy-to-let models such as HMOs can provide a buffer and cushion against market shocks. But, despite its resilient and robust nature, investing in HMO properties can come with added risks which could be a pitfall if they are not addressed correctly. Taking this into account, those exploring their options should seek practiced advice and ensure their investment will work in their favour.”

*Assumptions: £650,000 in property assets now, based on 4% per annum house price growth, 2% per annum rental growth.