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  • Property Yields

    Minimum yield for BTL?

    There is a massive different between gross and net yield. So, what I would like to know is what gross yield makes an investment in property worthwhile?

    I understand that there maybe capital appreciation as well but with house prices where they are right now, it's hard to see much capital appreciation over the next few years.

    Everything now appears to be against landlords so when you take into account expenses, tax etc what percentage return makes it all worthwhile?

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    I could give a simplistic answer and say for example 8% gross and 4% net

    But it would be a fairly superficial response . More work needs to be done to be really helpful

    One also has to define `gross` `net` `yield` and `worthwhile`

    These words  have different meanings to different people

    Gross Yield on Debt maybe 20 -40% for me . Net yield after tax on purchase price maybe only 3%

    And people think differently about what is worthwhile to them

    That may depend on your individual tax position or just your view on life in general

    Someone starting out may feel a low yield may be worthwhile if they have a 100K job for the next 20 years

    They may be just content to wait 20 years for capital growth and settle for 5% yield

    A full time professional investor may need this money for living expenses so look for a 10% yield

    Lots of variance in between . A 50K job and a 7.5% yield maybe ok for some

    If I buy a property for 90K which I know is really worth 100k  I may settle for 5% gross yield

    If I know I can add 10K of value to it by spending only 5K I may settle also for 5% gross yield

    If I buy a property for 100K and its only worth 100K then I might want 10% yield to compensate

    Areas of the country may give you a different answer as well

    So everything has to be weighed up before the answer is given

    I used to aim for 10% yield gross on purchase price. I can work this out  in 10 seconds

    This was just to give me a back of an envelope quick  calculation tool before i viewed

    If that passed the test  the calculator got some further bashing  as my pulse rate went up

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


    I start backwards first

    I look at my costs and then look at the amount of  profit I expect - at least 300pcm

    Anything less and I walk away

    As a rule of thumb in the NE £595 rent £300 profit over the portfolio for new purchases in my Company

    If I were buying which I am not!

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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.

    Firstly the overall yield is split between Rent & Capital Growth

    In SE the latter predominates and vice versa in Midlands/North

    Parts of central London over past 20 yrs have seen 10 fold price rises - hence a 900% Cap Gain

    That property supports a gross Rental Yield of sub 3% in some cases

    Conversely in really deprived locations in North the gross rent yield can be as high as 20%  - but with no prospect of Cap Growth



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    I have to pick you up on the North Market

    To say there is no capital growth is quite wrong

    I could show you property I purchased I the late 80s and going forward to 2007 which has done very well

    This the true figs

    2 bed flat purchased in 1989 £12500

    2 bed Flat value in 2007 £90000

    2 Bed flat after crash in 2007 £55000

    2 Bed Flat today £70000

    its only the past 10 years since the crash that North property has not performed well

    so to say no growth is totally wrong



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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.

    I did say in really deprived locations in the North


    In HORDEN SR8 a Housing Assoc last yr sold 170 empty 3 bed houses - cos nobody wants to live there - av sold price per unit was around £17k

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    Also the OP will be starting from today - so going forward growth may be an issue across whole of UK

    As ever start / finish points determine actual growth

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    I honestly believe we will not see the growth in property prices that were seen in the past 30 years

    every part of the UK will see a slow down

    Inflation was always the Landlords friend but I believe property wont even beat inflation for years to come

    Income yield is key to success today

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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.

    If wages increase so will house prices. In 10 years time prices will be higher than they are right now in the south.

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    The BOE will raise interest rates to slow inflation down

    and with BRITEX anything could happen

    my own feeling is we will see little inflation in the next ten years or longer

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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.