Mark,

Thanks for the added detail.

Have you come up with specific numbers in terms of what you would need in gross income, the net income, your expected housing costs in the SE, and the size of the portfolio that would be needed?

For the portfolio, just assume all cash with no debt and work up gross income numbers. You can add in the impact of debt and the risks associated with the debt (interest rate exposure mostly) later.

3-5 years is pretty quick unless you were starting with a lot of cash. Property tends to be capital intensive. Buying smart and then adding value over and above what you spend helps reduce the capital requirement. I am just saying that it is hard to produce a decent income until you have a large amount of equity.

In most UK situations you will find that people earn about what the debt cost them when the BoE base rate is 'normal'. With that broad statement I can ignore the value of the property and focus on the equity when trying to ballpark the amount of equity necessary to produce a specific income.

It might be wise not to publicly state certain figures. That is your call.

(19-10-2012 12:09 AM)john_corey Wrote:  Mark,

Thanks for the added detail.

Have you come up with specific numbers in terms of what you would need in gross income, the net income, your expected housing costs in the SE, and the size of the portfolio that would be needed?

For the portfolio, just assume all cash with no debt and work up gross income numbers. You can add in the impact of debt and the risks associated with the debt (interest rate exposure mostly) later.

3-5 years is pretty quick unless you were starting with a lot of cash. Property tends to be capital intensive. Buying smart and then adding value over and above what you spend helps reduce the capital requirement. I am just saying that it is hard to produce a decent income until you have a large amount of equity.

In most UK situations you will find that people earn about what the debt cost them when the BoE base rate is 'normal'. With that broad statement I can ignore the value of the property and focus on the equity when trying to ballpark the amount of equity necessary to produce a specific income.

It might be wise not to publicly state certain figures. That is your call.

hi John

10k income a year gross would be good (after tax etc 7k net), like i say i just want to use that income for a mortgage

housing costs in the SE for a 2 (maybe if your lucky 3) bedroon terrace, £180-190K

how many properties would i need to generate that kind of income?

too many i'm guessing

can get 3 properties for that in the North!

Hi Mark,

It's worth noting that the majority of lenders do not accept BTL income as "income" for BTL lending purposes.

A third option would be to buy your own home and rent out some rooms - which will generate a good income and is also tax efficient.

You can use the rental income to help towards your own mortgage, or could put it into a savings account to help build a deposit for another property.

Mark,

Sticking to gross rather than net as the tax impact is normally down to an individual where gross applies to all.

What is the typical yield one could earn with BTL? Pick a number, any number you feel is right.

Take the annual figure you want to earn (£10K a month x 12 equals £120K) and divide it by the gross expressed as a numeric value.

£120K / 0.x where x is the expected yield.

Assume that 5% is realistic. No need to agree or disagree as I said to assume this is right.

£120K / 0.05 = £2.4 million.

Once you have a portfolio valued at £2,400,000 and it is yielding 5% a month you will see £10K in income.

Now, the problem with gross yields is expenses do happen. If you want to use a net yield figure, even better. A crude way to estimate the net yield is to take the gross and assume 50% of the total expected income is spent on expenses including voids or when the tenant fails to pay.

Going back to the above you would need almost £5 million in BTL property to produce the income you desire.

While that might sound like a lot I know people who have created such an income with a similar sized portfolio. They spent 10 to 15 years getting there. The level of debt makes a difference through gross yield calculations do not consider debt. If you are in London we are talking about 10 rental flats to hit £5 million. If one were to look at the NE, you would need to buy a lot more houses to hit the same total value. Rents for value would be higher outside of London while the appreciation might be lower.

The UK government limits a person to a pension of £1.8 million as they are creating a practical cap of less than what you want to have in income. Rather than build a large pension you can build a BTL portfolio. You can build it to any size you like. The growth is largely tax sheltered in that you do not pay taxes on the gains if you do not sell. You will pay taxes on the income when earned. Income from a pension is taxed when you receive it. The BTL income can be received before the retirement age.

Some will earn higher yields and they might operate with lower expenses. I am giving you the back of an envelope version so you can get a rough sense of the numbers. I would not worry about being perfectly efficient. I would focus on understanding the bigger picture.

I have heard of one such franchise company called property mentor. has anyone heard or dealt with them?

They offered to train me for £5k, then I could join the franchise.

Hi Ruth,

Property Mentor have been discussed at length >>> here.

I was not aware that they were running a franchise though. I thought they just offered training ....

What is the franchise offering?

hi John

thanks for the figures above

that was 10K a year not a month! (well that would be nice

so you're saying i need 2.4million of property to generate 10k per year? or a month?


thanks

Mark

(22-10-2012 11:44 AM)bargainhunterz Wrote:  hi John

thanks for the figures above

that was 10K a year not a month! (well that would be nice

so you're saying i need 2.4million of property to generate 10k per year? or a month?


thanks

Mark

Wish my portfolio was netting 10k a month!

The math I shared was to produce 10K a month, 120K a year.

Rather than focus on the numbers, look at how the equation works. You can then substitute what ever number you want and it will calculate the size of the portfolio. If you feel yields will be higher or lower, substitute the yield figure and see what happens.

It is a trajectory rather than an absolute prediction. You can get a strong sense of what you need based on X, Y, and Z for assumptions. You can then adjust the variables to see how sensitive the answer is when the specific variable changes.

Having looked at franchising from both sides of the fence I have come to the following conclusion.

Franchising works well in highly brand driven industry sectors and where there may be a high level of legislation and regulation.

Mcdonalds and Costa work well as franchises as people know the name.

A guy I know owns a couple of franchises that work in providing nurses - it's a very specialised industry with lots of regulation and specialist knowledge.

I don't see that property franchises work particularly well especially when the set up costs are very high. (different when the buy in cost is comparatively low and the franchise is really a support and learning network).

I know there are franchises out there that have very high buy in costs and the support is really only in the form of education, much of which could have been learnt over time by shadowing experienced investors.

Consider the fact that most people who buy into these are not experienced property investors. I think a grasp of basic maths and a few hundred pounds spent educating yourself can get you to the point where you know if the deal you are buying delivers what you want it to.