Buying a second property

Radiantsoul

getmore4less wrote: »

But as a sustainable investment(without capital gains) it needs to be at this level.

Any investment lower than this start to involve more risk.


Long term property is a good investment(3-4 generations can become self housing never needing to worry about the boom/bust again) but speculating that a particular property might be of interest to a child in xx years time is another risk.

I suspect there is more involved here

I suppose I would be unhappy renting on that basis. If was purchased £100k you would need to let it out for £10k per month. That is £833 per month. A 25 year repayment mortgage on such a property would be broadly equivalent in terms of costs if interest rates were 9%. Now I am ignoring costs of ownership, but I think that 10% yields cannot be common.

VIGILANT22

Radiantsoul wrote: »

I suppose I would be unhappy renting on that basis. If was purchased £100k you would need to let it out for £10k per month. That is £833 per month. A 25 year repayment mortgage on such a property would be broadly equivalent in terms of costs if interest rates were 9%. Now I am ignoring costs of ownership, but I think that 10% yields cannot be common.

For an investment property valued at 100k, your mortgage would be 75k (25k deposit) ..for tax efficiency you would not have a repayment mortgage on a BTL...as the capital element is treated as an investment...therefore your mortgage payment would be approx 320.00pm...the lender would need to know this could be rented at a minimum of 125% of mortgage payments... = 400.00pm...

Radiantsoul

VIGILANT22 wrote: »

For an investment property valued at 100k, your mortgage would be 75k (25k deposit) ..for tax efficiency you would not have a repayment mortgage on a BTL...as the capital element is treated as an investment...therefore your mortgage payment would be approx 320.00pm...the lender would need to know this could be rented at a minimum of 125% of mortgage payments... = 400.00pm...

Yes, but I was looking at it from the tennants point of view. In other words why would a tennant pay a rent giving a 10% yield when they could buy for less.

getmore4less

Radiantsoul wrote: »

Yes, but I was looking at it from the tennants point of view. In other words why would a tennant pay a rent giving a 10% yield when they could buy for less.

But can they, for most it requires long term and price rises.

Long term not many of us have had mortgage rates below 5% for all our owning years.

We also have to maintain the property, pay large costs every time we move etc.

It can pay to buy but it is only recently that landlords have accepted low yields, initialy because BTL landords went for capital growth and now there are cheap(ish) rates for those that mortgaged when the deals were best.

Find a low cost BTL mortgage under 5% and you could consider a lower yield if you have good control over costs.


A lot Pro landlords off loaded their duff stock when yields went below 5% and have been looking to reinvest when they find places that yield 10%+.

VIGILANT22

Radiantsoul wrote: »

Yes, but I was looking at it from the tennants point of view. In other words why would a tennant pay a rent giving a 10% yield when they could buy for less.

(tenant)

We will always have a need in the market for rentals.....many people will never qualify to buy, many people never want to buy....

Let me give you some examples of the demand aside from the obvious....... 1.when couples split up one partner normally requires somewhere to rent prior to assets being split....i2. influx of EU citizens...3. young people leaving home for 1st time....just some examples

Radiantsoul

VIGILANT22 wrote: »

We will always have a need in the market for rentals.....many people will never qualify to buy, many people never want to buy....

Let me give you some examples of the demand aside from the obvious....... 1.when couples split up one partner normally requires somewhere to rent prior to assets being split....i2. influx of EU citizens...3. young people leaving home for 1st time....just some examples

I am sure it is great if you can get yields of 10%, but I doubt there are many landlords who are able to. The reality is the rental market is larger than those who cannot obtain a mortgage and competition will drive yields down.

A quick google shows that rental yields are around 5%
http://property.timesonline.co.uk/tol/life_and_style/property/article6995740.ece

If yield rose to 10% when savings are paying close to zero then it seems likely that investment funds would flow back into market and compete yields back down.

Radiantsoul

getmore4less wrote: »

A lot Pro landlords off loaded their duff stock when yields went below 5% and have been looking to reinvest when they find places that yield 10%+.

I just feel that if it were easy to get yields that high everyone would be doing it rather than other investments. In theory when prices were falling the risk of investing in property should have increased and so a higher yield would be needed to offset the risk of capital losses. What seemed to happen in the BTL boom is that the risk of capital losses was incorrectly priced(in fact the whole credit crunch revolved around incorrectly pricing risk).

I am sure higher yields are required than before and can be obtained as the risk of falling prices is now probably factored into yields. But I don't think a 10% yield is sustainable long term as it will invariable leed to a flood on new capital into the sector.

Pennylane

getmore4less wrote: »

But as a sustainable investment(without capital gains) it needs to be at this level.

Any investment lower than this start to involve more risk.


Long term property is a good investment(3-4 generations can become self housing never needing to worry about the boom/bust again) but speculating that a particular property might be of interest to a child in xx years time is another risk.

I suspect there is more involved here

Like what getmore4less??

Jonbvn

Radiantsoul wrote: »

I just feel that if it were easy to get yields that high everyone would be doing it rather than other investments. In theory when prices were falling the risk of investing in property should have increased and so a higher yield would be needed to offset the risk of capital losses. What seemed to happen in the BTL boom is that the risk of capital losses was incorrectly priced(in fact the whole credit crunch revolved around incorrectly pricing risk).

I am sure higher yields are required than before and can be obtained as the risk of falling prices is now probably factored into yields. But I don't think a 10% yield is sustainable long term as it will invariable leed to a flood on new capital into the sector.

To precis the above, BTL may not be be a good investment at the moment.

I have considered it recently, but none of the properties I have looked at give a yield of even close to 5%. Why bother when I can get this from a fixed rate BS account with no hassle? BTW, just relying on capital appreciation is surely not a viable business model.

getmore4less

Radiantsoul wrote: »

I just feel that if it were easy to get yields that high everyone would be doing it rather than other investments. In theory when prices were falling the risk of investing in property should have increased and so a higher yield would be needed to offset the risk of capital losses. What seemed to happen in the BTL boom is that the risk of capital losses was incorrectly priced(in fact the whole credit crunch revolved around incorrectly pricing risk).

I am sure higher yields are required than before and can be obtained as the risk of falling prices is now probably factored into yields. But I don't think a 10% yield is sustainable long term as it will invariable leed to a flood on new capital into the sector.

As with any investment it's the difference between a pro and amature.

You are right it is not that easy to find the high yielding properties but the pros(landlords not property speculators) have always looked for high yields and picked off the best properties leaving the dross low yields for others.
The pro landlords dont need to worry about the capital they get in at the right price(yield) and are in for the long haul

It is the property speculators(with letting as a side line) and BTL muppets not the pro landlords that got it wrong.