3 Ways To Profit From the Buy-To-Let Boom — LSL Property Services plc, Countrywide PLC and Rightmove Plc

LSL Property Services plc (LON: LSL), Countrywide PLC (LON: CWD) and Rightmove Plc (LON: RMV) are three ways to profit from the buy-to-let boom.

| More on:

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Right now the UK property market is booming. However, an often overlooked aspect of this boom is the buy-to-let market, which is also reporting rapid growth, as first time buyers are pushed out of the property market due to rising prices. 

Indeed, international property company Savills believes that up to a million more renters will be looking for homes within the UK during the next five years. Managing these properties is usually a lucrative business, as revenues are recurring and contracts guarantee income for an extended period.

So, here are three of the best ways to play this trend.

Bigger is better

Rightmove Plc (LSE: RMV) is the UK’s number one property website and is benefitting from a strange phenomenon called ‘property porn’. 

housesThis property porn movement is driving Rightmove’s growth — the company’s website traffic jumped up by 14% during the first three months of this year. Actually, during January of this year, visitors to Rightmove’s website viewed a total 1.45 billion pages of property, making Rightmove one of the UK’s top websites in general. 

The great thing about a business like Rightmove’s is the fact that the company has very low overhead costs, but generates large amounts of cash. Indeed, during 2013 Rightmove generated £83m in cash from operations, but capital spending only totalled £1m. 

Rightmove is returning as much of this cash to shareholders as it can. The company spent £57m buying back stock during 2013 and returned £25m to investors via dividends. Further, during the first three months of this year, Rightmove acquired an additional 1.2m shares at a cost of £30.8m.

Current City forecasts expect Rightmove’s pre-tax profit to jump 21% this year, followed by growth of 14% to £113m during 2015. 

National presence 

National property group Countrywide PLC (LSE: CWD) is another play on the UK’s booming property market and buy-to-let business. 

Countrywide has a national presence and with a market cap of over £1bn the company should have a place within any property focused portfolio. 

Countrywide is both an estate agent and a lettings agent, so is able to profit whether the property market is going up and down, as the letting business gives a stable, predictable flow of income. 

The company reported strong demand from buy-to-let landlords during the first quarter, reporting a year-on-year rise of 28% in the number of residential properties under management. As a result, lettings revenue jumped 20% from the same period last year.

What’s more, due to Countrywide’s size, the company was able to achieve impressive economies of scale and while revenue only rose 20%, gross profit jumped 50%.

One stop shop

LSL Property Services plc (LSE: LSL) is a one stop shop for property and related services. The company conducts the sale of residential property, provides lettings services, surveying, mortgage advice and services to mortgage lenders, including valuations, asset management and property management. 

LSL also owns the Marsh & Parsons brand, a London estate agent and lettings agent, which is growing rapidly. Marsh & Parsons reported revenue growth of 23% during the four months to 30 April. Overall, LSL reported that during the first four months of this year total income grew 24% and lettings income ticked higher by 12%. Its financial services income jumped 33%.

Additionally, LSL is also benefitting from the property porn movement, as the company owns a 5% stake in Zoopla Property Group Ltd, owner of the Zoopla property website. Like Rightmove, Zoopla is experiencing record levels of traffic this year and there is chatter that Zoopla could be looking to go public, which would be a windfall for LSL. 

For example, Countrywide holds a 6% stake in Zoopla and the company registered gains of £28m on the value of this investment during 2013.

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 assessed. Consider taking independent financial advice.

Rupert does not own any share mentioned within this article.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »