The ideal tenant. The ideal location.

Press release: April 2005

The ideal tenant.  The ideal location. 

Mortgages for Business survey reveals the most profitable parts of the country and most profitable tenants.

The first three quarters of 2004 were widely regarded as excellent for the nation’s buy-to-let investors, but with various reports of the market levelling, just who makes the ideal tenant and in what parts of the country should would-be and experienced investors choose to invest?

A new survey from Mortgages for Business, one of the country’s leading buy-to-let mortgage brokerages, lifts the lid on investors’ highs and lows of 2004 and their expectations for annual returns in 2005.

Investors report that portfolios in the Midlands and Scotland offered the greatest overall return on investment (ROI), based upon rent and asset growth, in 2004 with an average of 29.6% and 27% respectively.  And whilst investors in the Midlands and Scotland may not be expecting to see dramatic rises in ROI levels in 2005, they still expect to see a small increase of between a 2 and 6.6%.

Investors in the South West report an average ROI in 2004 of 17.3%, investors in Wales 14%, the North West 8.3%, and in London and the South East the lowest at 5.9%.  Investors in Wales prove to be the most pessimistic expecting to see a small 5% drop in yearly returns in 2005, perhaps a reasonable expectation given the dramatic residential asset value growth seen in 2004.  Investors in the North West expect annual returns to drop 2.7% and in the South West annual returns drop of 1.4%.  Investors in London and the South East expect to buck this trend with a modest increase in annual returns of 0.9%.

David Whittaker, managing director of Mortgages for Business, comments: “2004 was widely regarded as a vintage year for buy-to-let investors with many seeing good rental returns and excellent capital increases.  However, investors are showing an increased degree of caution in 2005 with expectations for returns remaining fairly stagnant.   We would encourage investors to continue to see property as a long term investment strategy that is cyclical by nature.”

With the exception of the North West where investors expect rental incomes to decrease by 0.7%, investors expect a modest increase in rental incomes in 2005 with the highest increase in Scotland (8.3%) followed by the Midlands (5%).  Investors in London and the South East expect to see an increase of 3.8%, in Wales 3% and in the South West just 2.4%.

The ideal tenant?

With regards to tenants, investors report that families prove to be the most profitable offering an average ROI in 2004 across the country of 28%.  DSS tenants also offer a respectable return of 14.3%, private individuals 11.1% and students just 9.7%.

Property purchases

Investors in all parts of the country, with the exception of Wales where portfolios remained static, continued to increase the size of their portfolios.  Investors in North West were the most active, purchasing on average three properties in 2004.  Investors in Scotland purchased on average two properties, in the Midlands one property, in London and the South East 0.8 properties and in the South West 0.4 properties.  Investors with an average portfolio of between six and 10 properties were the most active in acquiring properties adding on average 2.1 properties in 2004.

Commercial property

The Mortgages for Business survey also asked investors about their strategy and plans regarding commercial property.  Currently over 30% of investors in the North West and 20% of investors in the South West include commercial property in their investment portfolio.  Investors in London and the South East, Scotland, the South West and the North West all report plans to include commercial property as part of the portfolio in 2005.

“With investors expecting smaller ROIs in 2005, many are looking to the commercial property market to boost their investment.  We believe that this is a trend that is likely to become more apparent as 2005 progresses,” concludes David Whittaker.

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Notes for Editors

About this survey

Mortgages for Business has a panel of 30 investors drawn from across country and the property investment spectrum.  This panel is regularly approached for their views on various aspects of the property investment market.  This survey on investing in commercial property was conducted between December 2004 and March 2005.

Mortgages for Business

Mortgages for Business are independent experts in buy-to-let and commercial mortgages managing single and multi-let property portfolios for thousands of UK investors.  Its brokers have access to a large portfolio of fixed and variable interest rate mortgages from a panel of over 30 lenders and offer truly independent advice that is appropriate to investors.

Case studies

Mortgages for Business has a number of case studies of investors in residential and commercial property.  For more information please contact Matt Baldwin on the number below.

For further information contact:

Matt Baldwin, Coast Communications

Tel: 01233 721597 or 07930 439739

Email: matt@coastcommunications.co.uk

Jonathan Moore, Mortgages for Business

Tel: 01732 471619

Email: jonathanm@mortgagesforbusiness.co.uk