If you compare this to other investment types during the same time frame, buy to let is the best result – resulting in a compound annual return of 16.2%. If the same amount had been invested in UK shares, it would have grown to an average of £3119, or invested in commercial property, would be around £4494.
If the property had been bought entirely in cash, the compound annual return would have been 9.4% and increased the £1000 investment to £5071. Any landlord with a mortgage, would see a bigger return on their cash as they are able to offset the mortgage interest costs to get tax breaks on their rental income.
The last few years have been good for private landlords as the property market has risen. During 2014 values increased by an average of 8.3%. With the introduction of the buy to let mortgage in 1996, the residential property market was opened to all investors.
The future looks good for investors, if the prices continue to rise at a rate of 4% per annum, and rents by 2% each year, investors can expect £1000 invested at the end of 2014 to have become £2874 by 2024 – providing an annual return of 11.1%. This will assume that a 75% LTV mortgage rate rise to 5.5% by 2022.