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  • Deal Finding

    Dispelling the myth: high yield = high risk

    I think you are in a better position to answer your own question as you have the algorithms and data analysts on the property markets, with which you are able to show property with the best risk /reward.

     Only thing I would say is how, long does your data go back.  If only since 2007 or shorter then I would question it as during this period (2007/2018) interest rates have been artificially low with central bank intervention/ manipulation. Money ploughed into the system resulting in the largest debt levels ever seen today.  These factors have created an artificial bubble in property prices as with every other asset class. Hence thrown yield/risk ratios to levels not seen for a very long time.

    I have seen various asset  classes using algorithms and the rest to predict future values only to been blown out of the water as something always comes along not accounted for.  May be this time Brexit -was that evaluated in your programme.

    So risk/reward now depends upon future government policy, economic conditions and many other factors which will all impact on future of property prices and yields levels. To what extent time will tell but one things for sure its going to be a different rsik/reward profile on property  than we have seen over the last few years.


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    ``What percentage yield would you say is high i.e. 6,7% ?``

    Yield is a rather nebulous word and has different meanings to different people 

    So 6.7% could be relatively high or low depending on that meaning

    High if net  and post tax, post costs and in the SE

    Low if gross pre tax pre costs  in the NE

    ​Please confirm what definition of yield you are using ?

    I aimed for 20 - 40% gross ROI  whilst expanding 2000 - 2012

    I only invest in one area - Milton Keynes

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


    Thank you for your comments.

    This aim of this thread was to explore what we feel is a misconception that high yield = high risk for newbie investors as currently they could be scared away from high yield hearing this notion.  We would be happy to answer questions and partake in a discussion about property data separately - that would be an awesome thread to start.

    You guys are very experienced and knowledgeable property buyers with years of experience.  So let us keep terms such as  "net, post tax, ROI" etc out of topic.  A newbie has probably just started to understand the concept of yield.  Let us stick to gross yield and say anything > 7% is high yield.

    Take a hypothetical example of a newbie in the below situation:-

    They have £50, 000 to invest into a property

    They have a buy to let mortgage @75% LTV approved.

    They are willing to invest anywhere in England.

    They do not care for profit.  All they desire is minimum risk.

    Douglas with his insight and economical knowledge has identified problems on the horizon being:

    Higher interest rates, future values to be blown out by Brexit and stricter fiscal policy alongside potential flaws in sample data modelling.

    Now the potential pitfalls and your personal experience have been expressed.

    Douglas and Jonathan as experienced property buyers it would be good if you could use Zoopla or Rightmove to post a suggested example of a property which has a gross yield of <7% which would give them minimum risk in your opinion to help this newbie move forwards?

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    Transparency notice: OneandOnlyPro is a commercial partner of Property Tribes.


    """"This aim of this thread was to explore what we feel is a misconception that high yield = high risk for newbie investors as currently they could be scared away from high yield hearing this notion.  We would be happy to answer questions and partake in a discussion about property data separately - that would be an awesome thread to start.

    You guys are very experienced and knowledgeable property buyers with years of experience.  So let us keep terms such as  "net, post tax, ROI" etc out of topic."""""So no hard numbers


    Tells you all you need to know. 

    Misconception? I think not.


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    It would be good if you did some of the leg work tbh as its your thread

    I`ve given countless examples on PT in  the last 8 years

    You are though still yet to define what you mean by `yield` ?

    Terms such as "net, post tax, ROI" are all wrapped up in the yield figure

    To ignore those terms  makes any exercise done and any conclusions drawn relatively weak

    And newbies should be made well aware of what those terms mean from the outset in my view

    So with respect  please set up your own examples at what you are driving at

    We can all then comment accordingly on them

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


    Take a hypothetical example of a newbie in the below situation:-

    They have £50, 000 to invest into a property

    They have a buy to let mortgage @75% LTV approved.

    They are willing to invest anywhere in England.

    They do not care for profit.  All they desire is minimum risk.


    There's some very confusing assumptions made here imho.
    1. You say they're a newbie.
    2. They are willing to invest anywhere in England???? Er, that's not generally a newbie decision they usually make, unless they're incredibly reckless/naive!
    3. They do not care for profit? Ok, so they're investing for CG then? Why wouldn't they be interested in profit? It's £50k after all - I'd be wanting some!!!
    4. All they desire is minimum risk? Ok, so what about points 2 & 3 above then?

    It's like you're wanting us to write your business plan/marketing plan for you? The picture you gave of the ex-LA property had very mixed messages:
    1. It was definitely ex-LA, no maybe about it.
    2. It was £27.5k, so not generally mortgageable anyway?
    3. The type of property even if at the generally mortgageable value (£40k+, I don't know as it's never been an issue for me).
    4. "This property may be better to avoid for investors desiring a hassle-free property investment experience." There's no such thing unless you'll be fully managing it for them.

    A lot of points to think about there.

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