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Hello. PT Warriers.
I would like to know, ideally, from PTW across the country to get a good understanding of the demographic.
Purchasing an asset for 550K, what would you want in terms of annual turnover and therefore ROI.
I'm am very interested to know what returns are wanted for investors who work at this level.
For me there is no difference in the ROI I want for a £50k investment or a £550k investment. But I would say there would be certain areas where I would not dream of investing £550k on property as I know it would be niche market and therefore higher risk and therefore would want a higher return.
What I mean is £550k is normal for properties in London and SE (and some other places) but up north is not common like Blackpool.
I would not dream of looking at a deal unless it is >10%
Thank you for your reply, very interesting. And you are spot on with your comments. (Niche market in the Northwest
The more important question to ask is, assuming you are using finance / mortgage for the deal, does this deal pass the PRS stress test to obtain a BTL mortgage. For £550k value, assuming 75% LTV mortgage you need to be achieving monthly rent of £2400 to £2800. Tall order even for London standards, but not impossible as you have not provided details of the property.
Personally, I only acquire property with a yield plus estimated capital growth rate of 15%. Assuming the property has a average growth rate of 5% pa predicted, the rent / yield has to be 10% ie. Achieving £4500 per month for this property in question. Just giving you an idea.
Above are just how we invest and by no means an advice. Just sharing how we do it based on the minimum info you provided.
Good luck with your investment.
Thank you, great to understand how you "guys" operate and think from an investment perspective. All of which I agree and understand. And I appreciate the post was an open one. The property in question generates 5800 pcm so does tick all the boxes. More comments welcome.
Hi Richard. I may soon be in the same position by selling some of my portfolio. Please can I ask you what and where you are buying to achieve this rent?
Hi. I'm not buying it personally, I am working on sourcing a deal for this unit. This is the reason I wanted to understand the numbers I was seeing with investors who work with bigger numbers. Sorry of I am being vague, but understand this isn't the forum to promote.
For me - £550k. Ideally that would be 15 houses - £35k deposits, taxes, costs.
Pre-tax profit of £200pm (minimum) on each property after mortgage cost - £3k a month - £36k a year.
Then just keep fingers crossed there is no s24 for ltd companies, use dividends and multiple family members to get money out of company, and wait for corp tax to drop to 18%
Really over simplified, as there will be other costs - but pick the right property (check the roofs!!), make sure boiler, windows, etc, as little as possible needs doing, then get the right tenants. (3 bed family homes are the winners)
I don’t like pensions - I want regular money coming in now, not in X years. I don’t like stocks and shares - they take too long to see any gain.
i don’t think there is anything other than property where you can get £550k getting you £36k a year.
36k ROI annually from 550k is actually quite poor by most investments. Under 7% pa. A simple index tracker with near to no effort could achieve that.
Average businesses not returning at least 30% ROI will be poor performing. Having said that, risk are higher. My business arm generates near to 60% ROI but more work needed than my property arm which generates between around 22% taking into account capital growth equity release.
Which tracker earns you 7% and pays you out each month?
Businesses aren’t investments - so you can’t say your business earns you 60% - as it’s not possible to recreate. If I had £500k, I couldn’t recreate your business. Also - most small businesses don’t earn hardly any profit. I’ve looked at buying businesses and once wages and costs are deducted - you’ve basically got to work in the business to make money. Or property out performs the profit margins. Look at most on dalton. You basically end up buying yourself a job.
I agree with you 7% is not a great yeild
today I strip money from my BTL and fund pension
from my self employed earnings I get 40 % tax relief
and I use my company BTL to fund my pension too
when I see the returns I have made within a pension it make no sense to invest futher in BTL
BTL on the surface looks ok but when I think how much tax I pay to with draw profits it’s not as good as pensions
so every spare penny I would have used in BTL deposit s I put in my pension
far less risk far less bother for similar nett returns
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.