Landlords may be feeling the pressure of the Government’s recent buy-to-let tax clampdown, but research suggests there is still plenty of money to be made over the long term.

Analysis by mortgage lender Kent Reliance found a basic tax paying landlord, placing a typical 30% deposit of £73,908 on a property, would generate a total profit of £265,650 after all costs and taxes over 25 years.

Accounting for the impact of inflation over the period, this represents a profit of £162,000 in today’s money, or £6,475 every year, the research claims.

Assuming that house prices and rents rise in real-terms by a conservative 1% per year – over the 25 year period, Kent Reliancee says an average buy to let property would grow in value to nearly £516,000, providing gross capital gains of £269,464.

The rental returns are also still attractive.

Using data from the ONS, LSL, Citylets, BDRC Continental and the Registers of Scotland, Kent Reliance estimates a typical landlord receives rent of £10,134 per year per property. Over the course of a 25 year period, a typical property would generate a total rental income of £369,495.

Over the 25-year period, the research estimates a landlord would spend just over £373,309 on bills such as mortgage fees, tax and maintenance.

Tax makes up a big proportion of this, with more than £60,000 owed to the Treasury in capital gains tax if selling after 25 years, £29,000 in income tax, and nearly £10,000 in Stamp Duty.

That leaves a basic rate taxpayer with £269,464 of capital gains and £369,495 of rental returns, giving them income of £638,959 over 25 years. The £373,309 in costs then leaves them with profit of £265,650.

John Eastgate, sales and marketing director at Kent Reliance parent company OneSavings Bank, said: “The buy to let market is undergoing a sea change. Regulatory and taxation changes have altered the market dynamic, reducing its attractiveness to amateur landlords, and increasing the tax bills of higher-rate investors.

“In spite of rising costs, there are still healthy returns to be found in property for committed investors.

“However, the days of speculation are gone. It is a long-term business endeavour, requiring commitment and expertise. Investors must be prepared to undertake business and tax planning, understand the risks as well as the rewards, and, most importantly, the responsibilities they have towards their tenants.

“Policy change remains a threat, however, and it is essential that the role of professional landlords in providing vital housing stock is not undermined. Without them, the supply of housing in the sector would naturally shrink, leading to higher rents for a growing number of tenants competing for accommodation.”

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