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  • Property-a-holics

    Simple measures to mitigate risk?

    So we have all heard DL's wisdom on at what point she considers it safe to play: An 8% yield.

    Does anyone have a similar measure that they use to establish an acceptable risk level for their BTL activity?

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    I normally like to see £500 profit each month (before CT) after finance costs, service charges/ground rent and a suitable allowance for voids and maintenance

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    per property? how does that tell you whether you are running a high or low risk operation?

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    Sorry yes, per property.

    It works out around 6% ROI but its just a rough figure as I wouldn't let £30 or £40 a month stop me buy a property, for example, with parking (that I can rent out separately) or something with a larger than average floorplan, etc

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    You must be receiving more rent than me as most of my properties rent pcm is between 475 and 575.
    I aim for 300pcm per property before tax
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    Slowly working towards financial freedom


    Yes, I invest in East London where a 1 bed will rent for between £1250 and £1300pcm, and a 2 bed will rent between £1500 and £1600pcm

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    Ah so in my world I would expect to turn 1500 rent into 900pcm profit.
    I live in london but have never considered investing there
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    Slowly working towards financial freedom

    I only purchase properties that will also appeal to owner/occupiers.  It gives me confidence that, when I come to exit, I can appeal to the largest number of potential buyers.

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    Sounds like a good strategy and balances off the risk of being stuck with a property. Is there a measure you use alongised this to tell you what your current risk is with your investments?

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    I used to think like this, but I don't think I'm going to sell so I would rather something that rents well in a great location instead of something that might appeal to the resale market.

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    A property can be very risky  even its 8% yield

    DL has a very narrow parameter in my view

    You could buy a dog of a property with a headline rate of 10% yield

    Likewise you can by a beauty @ 6% yield

    Yield is only part of the DD .

    There is lots more to ponder before making a decision to buy or not to buy

    My acceptable risks is buying something where I understand the costs as best as I can

    So that`s a combination of  knowledge

    My knowledge and other peoples  knowledge who know more about the stuff i don`t

    When I know all the costs involved the risk reduces  to an acceptable level and then I proceed


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