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  • Buy-to-Let

    Cashflow.

    Hi all,

    Just wondered what the tribe thought was considered good cashflow?  So many investors I have met over the last few years consider £200 to be good but what are the tribes thoughts?  For the purposes of this conversation I am not differentiating between net & gross...Gracias.R.

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    £400 GROSS, £150-£200 NET,  single let low management.

     

    On todays mortgage products, you will need to HMO or buy way up NORTH, for better than my figures above. 

     

    Modern BTL is definitely not a short term cashflow model, it a long term model.

     

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    I consider a deal viable if there is £250+pm net cashflow.

    But yield is important - £250pm net on top of a mortgage of £600 pm - NO

    £250pm net on a mortgage of £300pm - yes

    Easy to get in Scotland !

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    Ditto  Joanna - I get that in Milton Keynes, Buckinghamshire but you have to work at.  I self manage so keep those costs and associated costs like voids, maintenance etc very low. The potential for capital growth here is also  I believe  better than a lot of  other areas. Its a growing city and 50 miles outside London constantly taking in the overspill.
    JOANNA CAROLINE said:

    I consider a deal viable if there is £250+pm net cashflow.

    But yield is important - £250pm net on top of a mortgage of £600 pm - NO

    £250pm net on a mortgage of £300pm - yes

    Easy to get in Scotland !

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    Jonathan Clarke. http://www.buytoletmk.com

    but you have to work at.

    Jonathans comment above is the most valid yet. Thats not to dis-respect the other replies to date, what I mean to highlight is that Jonathan confirms that good positive cashflow can be gained from properties that aren't in the North of England or Scotland although like many things it can be hard work.

     

    Its so often said that property investment is not a get rich business nor is it generally easy to withdraw from quickly as it is so illiquid however it can be very rewarding provided that a sound strategy is put into place and managed in an orderly and systematic way.

     

    The key by my way of thinking is to know your investment area and by know, I mean know it well. Pressure test your income by using interest rates of say, 8% and then see how it performs. Do not assume that you will get any capital appreciation in the short to medium term and look towards a balanced portfolio. If you base decisions on a single owned property all the risk lies there however, once you have two those risks are halved and so on.

     

    RobCommercial Management & Property Consultant, Wakefield, West YorkshirePlease visit my website, read the property blog & leave a comment; https://www.walkerfox.co.uk/blogE: rob@walkerfox.co.uk M: 07960 753550 T: @walkerfox S: Walkerfox

     

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    Lots of good points, I'd also add that you should analyse based on what you think you might need to spend on the property in the short term.  This is often overlooked by new investors. 

     

    If the kitchen / bathroom is dated but acceptable now (too soon to replace), old boiler, flat roof about to expire, etc - you might have to estimate when you will need to replace them.  Then divide the cost by however many months you think it will be until replacement. In reality you may have to replace sooner than you thought.

     

    So a property which has been newly refurbed, with +£180 net pcm might be better for cashflow, than a property that is currently +£250 net pcm which is going to need a new bathroom and kitchen inside 2 years, a new boiler in 3 or less, replacement flat roof in 5 years etc.  In this example if its £3,500 in year two thats MINUS £145 pcm for kitchen / bathroom alone... suddenly shortterm cashflow doesn't look so healthy.

     

    Talking about stuff thats on the immediate horizon, of course.  You'll have to pay for it somehow, and its best to factor that in and build up a separate reserve to fund it when its unavoidable.  So the money you are building up to pay for this, can't really be consider cashflow - or another way to look at it, the cashflow you initially expect is deceptive.

     

    Of course - once the works are done you'll have a better cashflowing asset than the first example.  So you have to take a shortterm AND longtterm view on it to see if its going to work for you.  Looking at EITHER view in isolation will not tell you whether its a good deal.

     

     

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