Better tracking of buy to let returns needed from landlords

A staggering 23 per cent of British landlords fail to monitor their buy to let returns, leaving £300 billion untracked

Those with Houses in Multiple Occupation (HMOs) were most likely to measure their portfolio with 95 per cent of owners tracking profits and returns while only 33 per cent of landlords with holiday homes did the same.

Confusion and uncertainty

Landlords also revealed a large amount of confusion over how to most accurately assess their returns, according to research from Platinum Property Partners.

Return on Investment is one possible method which uses gross profit, property costs including fees and repairs, and capital gains in its calculations but Platinum Property Partners say that Return on Equity uses a similar approach and can also be considered an effective measurement.

Despite this, only 21 per cent of buy to let investors measure performance using these methods with 56 per cent using less effective systems.

This means that while around £300 billion of buy to let profits are untracked entirely, a massive £700 billion may not be being monitored accurately.

Many landlords claim this is because they struggle to decipher financial terminology with only 24 per cent correctly defining Return on Investment meant when asked to pinpoint its meaning. More than half (56 per cent) did not know at all while a further fifth (20 per cent) were unsure.

A similar situation existed when landlords were asked to define “gross yield” and “gross profit” with just 26 per cent and 12 per cent of respective landlords able to do so.

Landlords also exhibited some confusion over how to calculate gross yields on their properties; using an extensive range of different calculations.

Platinum Property Partners Chairman Steve Bolton explained that this was because while buy to let is a thriving sector that has “boomed in recent years” it is still in a state of relative infancy “and professionalism in the sector has yet to catch up”.

With scores of new landlords hoping to take advantage of high tenant demand and hefty potential profits, Bolton warns that “a staggering amount of capital investment is not being managed diligently or being treated like a business”.

This is a situation that must change if the sector is to guarantee the best returns for its investors.