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This Reit is a smarter way to be a buy-to-let landlord

It offers all the positives of residential letting but with high returns and steep barriers to entry
June 29, 2023

Being a buy-to-let landlord is tough. According to data from estate agent Savills published earlier this month, higher interest rates and the removal of tax incentives mean that the investment model is delivering its worst returns since 2007, with “year one cash profit” slumping to 4 per cent. The agency says the situation may well get worse as the forthcoming Renters Reform Bill and stricter energy efficiency regulations “add to investors’ caution” and “further eat into profits”.

Tip style
Growth
Risk rating
Medium
Timescale
Long Term
Bull points
  • Niche in buy-to-let market
  • Demand ahead of supply
  • Energy-efficient portfolio
  • Shares trade far below NAV
Bear points
  • Dividend not fully covered
  • High debt gearing

Landlords have the advantage over tenants. A surge in immigration combined with years of government failure to build any housing means that scores of tenants compete for a dwindling number of rental properties. The result is rent rising at its fastest pace on record, yet the data from Savills shows this is still not enough for landlords to push their paltry profit margins higher.

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