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  • Buy-to-Let

    Making those financials work! (££££££)

    Hi all,

    I'd be interested to hear what kind of 'minimum financials' you look for when assessing deals - specifically, standard BTL's?

    • Minimum net yield (%)
    • Minimum net monthly cashflow ( £ )
    • Cash left in the deal (£ or % of total)
    • Mininmum ROI post-refinance on cash left in the deal (%)
    • Payback period on cash left in the deal (months/years)

    Just playing around with some figures into a spreadsheet, and trying to assess what would be deemed a "relatively good" deal - a recent example being:

    • 2.9% net yield (based on 3% interest rate)
    • Net cashflow of £203 p/month
    • £13k left in the deal (not amazing!), generating a 19% ROI
    • Payback period of 5 years

    Not an amazing deal by all accounts, though I get it's all investor specific.

    I'm trying to get a feel for what the general consensus seems to be.

    Kind regards

    Conor

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    Hi Conor

    You're getting 19% ROI. I think thats pretty impressive (although it looks like this figure doesn't include voids and maintenance)

    Where else can you make those kind of returns?

    What kind of returns would YOU like to make?

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    Hi Ncooper, thanks for your reply.

    For clarity, it did include voids and maintenance (c. 7.5% of rent) and voids (1x per year) along with a 3% interest only mortgage. It'd didn't include agent's fees. Rental assumed £525 per month.

    With regards the ROI - I agree, it's a decent return, it just doesn't set the world on fire, like some of the 'infinite ROI' deals you hear about.

    Unsure if these "no money left in" deals are a little like unicorns, to a degree... I accept they're out there, but you might wait a long period of time before finding one 'near perfect' deal, as opposed to several very good ones.



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    So you're happy with the ROI, but not so happy about leaving money in the deal?

    I dont use the BRR model so I always have money left in the deal, but a 19% ROI is still a pretty good return!

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    To a degree, yes. As you've mentioned, 19% is an amazing return on monies invested.

    However, the ability to "recycle deposits" is fundamental to the BRR plan, so leaving a chunk of the cash in would slow me down quite significantly..

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    With the current mortgage products and lending criteria, not to mention valuers acting on the cautious side, it is far more challenging to recycle all your cash than it once was!

    Most people seem to have to leave 10 - 15% in the deal.

    Of course, it depends on how much of a discount from market value you achieve, and how much you are able to force the appreciation by, and how the local property market is performing.  Probably best to err on the side of caution when working out how much cash you will have to leave in because its hard to predict, for the reasons given.

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    [Image: 4995468760_6be86655d4_t.jpg]
    general operations director, site owner and moderator - propertytribes.com


    Thanks Nick - that's what I'm hearing with regards to BRR.

    10-15% doesn't sound bad at all - that'd be c. £3k on the deals I'm looking at, which I could replenish relatively quickly with my salary. Leaving £15k+ in a deal however, not so much!

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    The key to this sort of thing is haeing enough deposits to buy new properties

    You either have to inject cash your self from salary or other income source or you will have to remortgage BTL property you own

    ie re cycle the deposit used

    This was normal before the crash of 2007

    Today is a very different world and it’s not easy

    You will be at the mercy of a valuer - his word is final and there is little you can do about it

    The only sure way is you have your own funds to use as a deposit and that will take some doing!

    The game is different  and starting with nothing and building an income takes much longer now.

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    Hi Connor,

    Great thread that you’ve started! I like the example you’ve given, and it would be interesting to see what other peoples would be as you said.

    I’d agree with ncooper1974 that 19% ROI is a good deal. However, every person has their own expectations as to what is “amazing” and what is not int terms of ROI, Yield etc.

    What do you think other people would deem a “relatively good deal” to be? Higher ROCI, Yield than what you have or about the same?

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