The total return on the average buy-to-let (BTL) property has decreased by 6% in the last two years to £15,280 due to a rise in mortgage costs and agency fees, along with a fall in capital appreciation, a report has found.

According to a report from Octane Capital, which looked at BTL initial investment, ongoing costs and total return, ongoing costs went up by 18% in the last two years to a total of £15,592 per year.

This includes BTL void periods, mortgage interest, agency management fees, landlord insurance, tenancy deposit registrations and average annual maintenance and repairs.

The largest increases were for mortgage interest per annum, which has jumped 25% to £10,210. This was followed by agency management fees, which has gone up by 19% to £1,817 per year, and the cost of void periods, rising 7% to £747.

However, BTL initial start-up costs have contracted by 17% to £9,952, as stamp duty has gone down 21% to £8,438. Agency fees have increased 19% to £1,514, and tenancy deposit registration is no longer applicable.

The report noted that average annual rental income has risen by 19% to £15,144 over the period, and average rental yield has ticked up by 17% to 5.8%.

Capital appreciation has decreased by 6% to £15,728.

Govt digitalising tax ‘will add a further cost’

Jonathan Samuels, CEO of Octane Capital, said that the average landlord has “benefitted from a very healthy level of rental income growth in recent years, and so while the level of capital appreciation seen on their property may have cooled, both aspects of their investment are still bringing healthy returns despite the instability of the current market landscape”.

He continued: “Of course, higher running costs, most notably as a result of higher mortgage rates, have dampened the overall net return they’ve seen. But it’s fair to say that this reduction in net profits has been fairly marginal considering the current economic landscape and the storm of property market uncertainty that we’ve weathered in recent months.

“There are still a great deal of opportunities available that will allow BTL investors to reduce their borrowing costs in the current market, and utilising a specialist lender is the best way to secure these.”

Samuels said: “It’s important to note that the government’s insistence on making tax digital will add a further cost to consider, although with an initial start-up cost of £350 and an ongoing cost of around £110, it’s unlikely to reduce the appetite for investment.

“And while the government is also looking to tempt more landlords away from the sector with their reduction in capital gains tax, our research shows that it remains a profitable endeavour, albeit slightly less so today versus a few years ago.”

If you are interested in learning more about the BTL sector, then register for The Buy to Let Forum, which takes place between 24 April and 2 May in Bolton, Birmingham, Cardiff and Reading.

Anna is currently the deputy editor for Mortgage Solutions and editor for Specialist Lending Solutions. She has worked as a journalist since 2019, having secured her Gold Standard NCTJ diploma from News Associates in a fast-track six-month course.


She started her career as a report at specialist publication The Insurance Insider covering a wide range of areas before joining Mortgage Solutions and Specialist Lending Solutions in 2021.


In her role, she helps put together and structure the news agenda for the day and writes up press releases, reports, interviews, analyses and exclusives across both titles. She also commissions blogs for Specialist Lending Solutions and hosts online masterclasses and in-person events across the business.


She has been shortlisted for three journalism awards, which include BIBA Journalist and Media Awards Scoop of Year Award in 2020, Headline Money Mortgage Journalist of the Year Award (B2B) in 2022 and 2023.


Prior to being a journalist, Anna worked in ecommerce across Snow + Rock, Cycle Surgery and Runners Need websites, and before that worked at specialist financial PR firm Rostrum.


In her spare time, Anna enjoys reading, seeing live music, and cooking for friends and family. When she gets a chance, she also enjoys hiking, skiing and indoor rock climbing.