When one talks about how more and more buy-to-let owners are selling up and putting their money to work elsewhere it’s easy to lay blame solely on a severe reduction in real returns over recent years.
A shortage of rental properties means that rents are generally edging up across the UK but a raft of policy changes from government bigwigs has sent costs through the roof. Whether it be through changes to the tax system that have ramped up stamp duty bills or reduced mortgage tax relief, or introduction of new laws like the Tenant Fees Act that has pushed up operating costs, landlords are finding themselves making some pretty meagre profits.
However, the hit to landlords’ bottom lines isn’t the only reason why so many buy-to-let investors are either throwing in the towel or not taking the plunge at all. And data released today from the Residential Landlords Association (RLA) shows why.
According to the RLA, the number of regulations that proprietors now have to abide by currently stands at 156, up from 118 at the turn of the decade. This is up a whopping 32%, yet the irony is that despite the increased legal onus on landlords, councils are not actually making use of these powers (the RLA says that in 2017–18, almost 90% of councils had not used new powers to issue civic penalties of up to £30,000).
A better buy
So why bother taking the plunge into the increasingly expensive and energy-draining buy-to-let arena when it’s possible to make much bigger returns with stocks? Long-term investors here can expect to make returns of between 8% and 10% per year and share pickers need not suffer the same sort of day-to-day commitment that property rentals require.
One such share I think’s worth picking up for 2020 and beyond is Tyman (LSE: TYMN). Expectations of a 7% profits rise next year leads to predictions of further dividend growth and therefore a 5.6% payout yield.
However, this isn’t the only reason why I think the small cap is a brilliant buy today; at current prices its price-to-earnings ratio for next year sits inside the bargain-basket watermark of 10 times (at 8 times), too.
A bright 2020?
The latest trading details released this week certainly highlighted the door-and-window-part manufacturer’s sunny outlook for 2020.
It’s not that conditions are improving in Tyman’s trading regions. Indeed the business said that its markets “generally remaining challenging,” with its European and UK regions worsening since late July and activity remaining broadly flat in North America. But thanks to a slew of operational improvements and the launch of new products (like its ERA Protect smartware devices) it said that profits should continue to rise in 2019.
And market conditions could be looking up for next year, too. Most recent Commerce Department data showed just spending on US construction projects rise 0.5% month on month in September. What’s more, expenditure could continue to improve into the new year should lawmakers in Washington and Beijing begin rolling back tariffs as Chinese officials recently hinted.
I reckon Tyman could prove to be a corking buy for the new year.
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Royston Wild 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.