Buy-to-let landlords are fleeing London. Here’s a better way to make money

Buy-to-let landlords are struggling to make a profit, says Harvey Jones.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Scene depicting the City of London, home of the FTSE 100

Image source: Getty Images.

Making money from buy-to-let has been a tough ask ever since former Chancellor George Osborne launched his triple tax attack on amateur landlords in April 2016.

Three-pronged assault

He hit investors with a 3% stamp duty surcharge, reduced wear and tear allowances, and phased out higher rate tax relief for good measure.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

The impact has been particularly brutal in London, where high prices have squeezed yields to among the lowest in the UK. The average property in the capital now yields just 3.4% a year, which falls as low as 1.93% in Highgate. These are well below the national average of 4.17%, according to

The stamp duty surcharge hit the capital particularly hard, typically adding £11,760 in London, against just £3,910 elsewhere. The average landlord now faces a £24,600 stamp duty bill in the capital, compared to £5,330 elsewhere, according to new research from Hamptons International. 

Get out of London

Almost six out of 10 London-based landlords now choose to invest elsewhere. Rents in Greater London may have hit the highest level on record at £1,737 a month, but landlords still cannot make their sums add up.

Unless you are a professional investor with a tax-efficient limited company, I reckon buy-to-let is now more trouble than it’s worth. I say that as somebody who has been tempted himself, but no longer.

Serious money

You need a 25% deposit to take out a buy-to-let mortgage. According to the Land Registry, the average London property cost £473,822 in 2018, which means you need £118,456. Then you need more money to cover stamp duty and other purchase costs.

The average UK property costs £230,776, so your deposit will still have to be £57,694 outside the capital, plus stamp duty and so on.

You also have to budget for doing up your property, complying with regulations, searching for tenants, taking deposits and doing inventories. Plus you have all the effort of managing tenants and maintaining the property, at the end of which you hand over a load of tax to HM Revenue & Customs.

Nice and easy

I don’t know why people still bother when they could take out a Stocks and Shares ISA in a matter of minutes, choose a balanced mix of individual stocks or investment funds… and that’s it! These three simple steps set you on the way to building a £1m ISA portfolio.

Better still, you don’t have to pay any tax on your income or capital growth, as you will do with a buy-to-let property. You don’t even need to mention your ISA on your self-assessment tax return, if you complete one.

Glory days

You can keep running costs to a minimum as well by investing through a low-cost online platform and choosing funds with minimal annual charges.

Better still, if you want to sell at any point, you can do it in minutes, whereas it could take months to offload a property you no longer want. Especially if the market crashes or is in the doldrums. London typically sets the trend for the rest of the country and I suspect it will be the same for buy-to-let, whose best days are sadly over.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

How I’d apply the Warren Buffett method to buying shares

Learning from billionaire investor Warren Buffett, our writer explains his own approach to investing in shares for his portfolio.

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

This dividend share yields under 1% — but I’d still buy it

This dividend share has a low yield. So why would our writer consider adding it to his income portfolio?

Read more »

Young lady working from home office during coronavirus pandemic.
Investing Articles

Looking for a good share to buy? Here’s how I do it

Here are two approaches our writer uses when hunting for a good share to buy for his portfolio to aim…

Read more »

man in shirt using computer and smiling while working in the office
Investing Articles

One cheap FTSE 100 share I’d buy for a new bull market

This FTSE 100 share is unloved and starting to look seriously cheap, says Roland Head.

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

How I’d invest £500 in UK shares in 2022

Investing a small amount of capital in UK shares can result in high commission costs. Zaven Boyrazian explains how to…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

2 battered FTSE dividend stocks to buy in July!

I'm still searching the FTSE 100 for the best bargains to buy. I think these two big dividend shares are…

Read more »

Woman pulling baffled face
Investing Articles

Can I trust Lloyds’ 6.1% dividend yield?

The Lloyds' share price has sunk in 2022, causing the bank's dividend yield to leap. But can I really trust…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

3 top stocks to buy before the market rebounds

Edward Sheldon highlights three beaten-up stocks he'd buy before global stock markets stage a recovery from their 2022 declines.

Read more »