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Profits drop for buy to let property investors in the UK

The latest quarterly report from research agency Business Development Research Consultants shows that just over a quarter of all landlords either break even or make a loss.

Of those, 7% make a small loss and 1% a large loss.

Respondents also said that prospects for letting are declining, having experienced an increase in the first and second quarters of the year.

The research also indicates that rental rates are set in line with the local market with 44% fixing their fees this way, with undercutting practiced by only one in seven private landlords.

When asked what other methods landlords use to choose the rates they charge, 21% said to cover their costs, 15% to slightly undercut the market rate, 8% leave it to the
letting agent and 6% charge the amount that housing benefit/LHA will pay.

Despite dwindling income 63% of landlords don’t have any plans to increase the rates they charge their tenants between now and the end of 2009.

In the last year 19% have actually decreased their rent, 27% have increased it and 49% have kept it static.

For the first time the survey asked landlords how often they approach tenants regarding rental increases.

Some 21% said they haven’t actually implemented a rental increase yet, whilst 50% said they tend to increase the rent regularly at intervals of between six months and two years.

Despite the challenges in the market, private landlords continue to enter the market with 20% of current landlords saying they have entered the market in the last 24 months, the most difficult times since the survey began in 2006.

However, not all have entered through choice with one in 20 forced into letting by being unable to sell their property.

‘With 2009 characterised as a year of survival for many landlords, we are starting to see signs of a brighter future into 2010.

Despite the current profitability situation, as shown by the findings in the latest survey, prospects for rental yields do appear to be improving in line with our landlords’ optimism index,’ said Mark Long, Director at BDRC.

‘The UK’s private landlords are a resilient bunch and will opt for a strategy that allows them to protect their income and portfolio,’ he added.