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  • Buy-to-Let

    A true lesson of BTL from the North East ...

    Out of interest, do you mind sharing a typical property in your area that you deem to be a good investment?

    To keep things simple, just a typical house price and typical rent.

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    I would buy a an Ex Council House three Bed

    Pay around 80k  25% deposit plus costs

    Rent around £595

    They are getting hard to find now But If I dont get 8% i wont buy

    since 2007 they have been my bread and butter

    Get the right price and its a good investment and families stay long term very little turn over (Voids )

    The problem I have at present is the prices are rising and they are now topping over 100K and more in the area I buy in

    as soon as I buy them I have a customer in within a short period

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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.


    Wow that is a very good deal. That would be very hard to find around my area. 

    So based on an interest-only mortgage of £250/month at 5% interest rate like you say above, you will be taking home £345/month which is impressive. 

    A few of those and yes I can see how those investments are better than the ones you’ll find in the South. You are less exposed to external factors and so your investment is safer. I fully appreciate and understand this. 

    If I was you, I too would place an importance on yield and have a minimum threshold. 

    ​But in London and the South East in general, we simply can’t invest that way. If you advised us to look for 8% minimum yield, we would never invest! The yields won’t be as impressive as they are in the North so we work with different metrics and fortunately for us we have capital appreciation on our side.


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    In the North we have two bites of the cherry

    I have made quite a lot of money in capital growth

    the example I have show purchsed below 80k as I have done a lot of times is a capital growth if properties I like are selling for over 100K

    The second bite of the cherry is with a good yeild a landlord can afford to either set the Cash aside or go capital and repayment

    I chosse Capital and repayment just to be belt and braces

    so If I purchased at say 75k with a 75% Mortgage of  around £56000 and pay it down over 10 years the mortgage would reduce by a third

    ie £37500 and with a modest growth rate the property will fetch over 100k plus

    so I end up with a lot of equity and a very low LTV and as the mortgage decreases lenders give me better rates

    The North and the South are very different animals

    an investor needs to know there weakness and there strengths and than you can make a profit

    The example I used at the beginning proves I got it wrong I paid too much for the Flat at 75K  I should have paid no more then 70k

    but we live and learn



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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.


    "The North and the South are very different animals

    an investor needs to know there weakness and there strengths and than you can make a profit"

    - Totally agree with this.

    It is possible to have both in the South also (yield and appreciation) however I find if one increases, the other decreases, it's impossible to have both consistently increasing.

    An example...

    I bought a 3 bed in 2011 for £170k.
    Rent 1100/month.
    Gross yield: 7.8% (Almost your 8% criteria)

    Fast forward to now, 8 years later, that same property is worth £400k, a £230k increase!
    The rent is now £1400. 
    The gross yield is now only 4.2%

    So as you can see, I have benefited from massive growth, increased rents yet my yield has decreased. This is the reason my properties have a low yield today. They were good when I bought but eventually eroded by capital growth. If we didn't have capital growth, my yields would still be strong. I know which one I'd rather have!

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    As ever there are many ways of viewing things.  The same position could be seen as the return on your initial investment has actually increased and/or that your current yoeld is in fact greater as if liquidated you have CGT to pay on your gain, though if you wished instead to remortgage the capital increase makes the situation different yet again.

    As for capital growth versus monthly income, depending on an individuals situation either may be preferable.

    Its where the tinkering of taxation both in terms of deductible expenses and capital gains are working against themselves, if the government is truly trying to shrink the sector then a rethink on cgt would make far more difference to many landlords , back to the days of indexation or the sliding scale, would offer those that have been in for the long term the ability to exit with sufficient capital to do something else and still make a living.
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    "In the North we have two bites of the cherry

    I have made quite a lot of money in capital growth"

    Really DL? In many threads you've stated that since 2008 many properties in your locale aren't even back to their 2008 value yet?

    Which is it to be?!

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    correct property purcjased from 2005 to 2007 has not recovered

    But If you had purchased after 2007 to 2015 at a good price you would have made money

    ie

    Purchase price in 2008 65k 3 bed house now worth around 100k and maybe more

    I doubled my Business with this sort of deal 2007 to 2015 was a golden time to buy

    But IF I had purchased the same property in 2005 to 2007 I would have paid around 120k for the very same house  so they have yet to recover the value paid

    it all depends when you purchased and the price you paid for the house

    Adam there is good money to be made in the North If you know what to buy and what to pay

    There are some very rich landlords in the North

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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.

    My properties are the same as dls but have had slightly more capital growth so I have enjoyed both yield and growth.

    It’s hard when your area doesn’t give you the return you want.

    In my area I can now only get 6% so I’m in the same boat as you!

    Andrew
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    Hi Dl,

    This is the exact way I run my business, all the figures are more or les the same.

    I won’t buy unless I make a profit with 5% IR and s24 etc.

    For me it’s has to be 8% yield.

    With low interest rates all roi calculations look good.

    Roi tells you how much money you make but YIELD tells you how safe you’re investments are agains tough times.

    Andrew
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