The past decade has seen a lot of change for landlords, including stamp duty reform, a new stamp duty surcharge for buyers of second homes and tax relief restrictions on mortgage interest payments for buy-to-let investors. All of this has made it harder for landlords to turn a profit.
We looked at the total returns made by an average landlord in England and Wales who sold up in 2024 after owning their buy-to-let property for 10 years, using our own data as well as figures from the Land Registry and HM Revenue & Customs. 10 years is around the length of time the average landlord owns a property.
We found that the average investor bought their property in 2014 for £243,368 and sold it for £346,168, making a gross capital gain of £102,800. They also earned total gross rental income of £152,641 over 10 years. This makes a total return of 105% on their initial investment, but is not realistic because it doesn’t include any costs.
So, assuming that 31% of a landlord’s rental income is spent on costs – a figure we have taken from HMRC tax returns – net rental income over 10 years comes in at £105,322, bringing the total gross return to £208,122. This equates to an average 86% return on their initial investment, or an average annual return of 8.6%.
Interestingly, the analysis shows that there’s roughly a 50:50 split between investors’ total returns coming from rental income and capital appreciation. Historically, capital growth has been a bigger driver of landlords’ gains, across the south of the country in particular.
Returns vary significantly by region. London investors have, by some margin, seen the biggest gains in cash terms over the past decade. Their £203,340 gross capital gain and total 10-year net rental income after costs of £249,538 equates to a gross total return of £452,878. However, investors in the capital also paid significantly more for their property in 2014 – an average of £691,777 – and so their percentage total gross return is 65%, or 6.5% a year. This is the lowest of any region.
By contrast, the highest gross returns over the past decade have been enjoyed by investors in the North West of England. They purchased their rental property for an average of £113,337 in 2014, made a gross capital gain of £72,660 and achieved 10-year net rental income of £62,903. The £135,563 total gross return represents a 120% return on investment over a decade, or an average annual gross return of 12%, almost double that of the London landlord.
Meanwhile, investors in the North East made the lowest total gross return in cash terms of £76,662 or 80%. Of this, 73% came from rental income.
There are also some major caveats to consider in this analysis. Crucially, it assumes that the investor purchased the property in cash, so there are no mortgage costs deducted. Also, we have not accounted for any improvement costs or taxes such as stamp duty, income tax or capital gains tax – all of which add up and eat into landlords’ profits. But it does illustrate how important capital growth is for investors, and how much future growth will dictate the shape of landlords returns.
