As an investment vehicle, BTL properties have long been held in the highest of regard. However, in recent years, regulatory and tax changes have served to challenge profit margins and investment potential with all landlords having to evaluate individual properties within their portfolio and adapt/diversify if necessary.

With this in mind, it was interesting to come across new research which looked at the returns seen across 12 investable assets in the last year to reveal where money has been best placed in the current climate.

It has obviously been a bumper year for the UK property market, with house prices rising across the board. The average UK homeowner is suggested to have experienced a gain in capital to the tune of 9.3% in the last year alone. So how does this compare to other investable assets?

The BTL sector sits under a constant regulatory microscope, as evident by the array of tax and legislative change seen over the past five years or so. These changes continue to shape how many landlords are structuring their portfolios and have resulted in far more activity at the more ‘professional’ end of the landlord spectrum than at the ‘amateur’ end.

Arguably the largest impact from this has been the growth in limited company BTL lending. And this is showing no sign of slowing anytime soon, quite the opposite in fact. So much so that the proportion of landlords who plan to purchase their next buy-to-let property through a limited company has hit the highest level for three years.

The summer of 2022 could well be a pivotal one for the housing market and the private rented sector as rising living costs continue to impact a range of personal financial scenarios, affordability, savings pots and homeownership aspirations.

With house prices experiencing sustained highs, the pressure on potential first-time buyers is mounting and big decisions need to be made over whether homeownership might be an option or if a longer-term rental arrangement may be more preferable from a lifestyle and flexibility perspective.

As the rise in the cost of living is testing all our financial capabilities, this is certainly no different for landlords who have many different forms of outgoings and costs to calculate relating to their property investments. Maintenance has long been one of the major considerations for landlords from a time and cost standpoint and with the price of labour and materials rising, even greater scrutiny is being placed on even the smallest of jobs.

There are always a number of considerations for landlords, new and old, to take into account when starting, adding to or diversifying their portfolios, especially when it comes to location. The capital has long been a hotbed of BTL activity due to the strong potential yields on offer and the ease in which to let properties. However, with the pandemic impacting the attraction of city living for a variety of reasons, the high-profile London rental market has inevitably suffered over the past couple of years. Although, positive signs are now emerging around a resurgence.

I’d like to drill down into some of the details which have emerged from Q1 2022 for landlords around yield and tenant demand – two fundamental elements in any successful portfolio.

Yield is an interesting one. It remains a balancing act for landlords who are looking to maximise the return of their investments whilst also factoring in rising living costs for their tenants who, like many homeowners, are feeling the pinch in the current economic climate. Yields will obviously differ when it comes to different property types, hence the current demand for holiday lets, short-term lets and HMOs. However, despite their growing popularity, the vast bulk of the BTL market continues to be dominated by the more ‘standard’ longer-term lets, a factor we have to consider when looking at general trends in rental yield.