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  • Buy-to-Let

    Calculating rental yield

    Hi,

    Who is your mortgage provider? That's an impressive mortgage interest rate you have; I make it 1.68%.

    Considering the mortgage stress test rules, I presume you are either remortgaging through limited company or fixing for 5 yrs, but either way 1.68% looks low??
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    Also 5% management fees seems like a bargain. Also id include and stamp duty or legal fees to give a accurate cost of what the house has cost you

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    1.68 2 years fixed with Barclays. No SPV, its owned by me and had to relocate...

    5% is just an example. I am letting out myself, no agency.

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    Personally I don't manage my own, as ea know what they are doing I really don't. Would worry me if you are trying to manage it yourself, from a distance if relocating and agree with above I want 7-11%. But im in north east so capital gain doesn't really exist so need good yield 4% I wouldn't touch personally

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    Are you aware of the rental stress test mortgage lenders do nowadays? 

    With a gross rental figure of £1750pm you can only borrow up to approx. 305K not the full 393K you have mentioned. Unless you fix for 5 yrs or operate via Ltd company you will have to meet this stress test. It could even be less than 305K if you are a portfolio landlord. Have you checked this with a broker?
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    I was just putting an interest rate to match the mortgage payments the OP was saying he was paying.

    I think you prob can find that rate though somewhere...


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    i find £1750 pcm rent on £525k worth of poperty astoundingly low

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    JamieH is right, its really important to separate ROI (return on investment) and Yield. I would suggest always starting with yield, its simple and does not include mortgages at all. In my view its the starting point for any property decision and a yield of 10% plus should be as concerning as one of 2%... If you want just big numbers then remember there is a payback for the high yields. ROI can be manipulated and in many cases can look enormous when property is highly geared and as such ROI has higher risk and as mortgage rates can change it can go from vast to non existent in a flash. Stick with yield is my suggestion, keep borrowing as low as possible and make sure you have a great long term rate from a good lender, be cautious at every stage and, as they say "measure twice, cut once" and if in doubt walk away and wait until you are sure. There s loads more to say on this subject but much is covered above by other members.  

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