Buying a second property

Pincher

Give it up, what is the expected yield?

A. Annual Gross Rent

B. Total cost of acquisition: House price+stamp duty+all fees

Yield = A/B x 100%

If you are being really picky, you should include any refurbishment costs in B.

The other one is mortgage interest cover, assuming you have the classic interest only BTL mortgage.

Cover = Annual gross rent / Annual mortgage interest x 100%

Pennylane

Thrugelmir wrote: »

Remember you are letting this out. Not living in it.

While a conservatory is a nice feature how much extra rent does it yield?

Remember, in the long term it will be for adult child.

It is a very small house and the conservatory is a good sized extra room. It would make a lovely breakfast/dining room. If I were looking for a place to rent, this would definitely sway it for me. The house is only suitable for 1 or 2 people and I'm thinking if you're at work all day it's good to come home and have somewhere light & airy to sit and relax.

Pennylane

Pincher wrote: »

Give it up, what is the expected yield?

A. Annual Gross Rent

B. Total cost of acquisition: House price+stamp duty+all fees

Yield = A/B x 100%

If you are being really picky, you should include any refurbishment costs in B.

The other one is mortgage interest cover, assuming you have the classic interest only BTL mortgage.

Cover = Annual gross rent / Annual mortgage interest x 100%

Coming out at 4.9%. No stamp duty.

How does that sound?

Thrugelmir

Pennylane wrote: »

Coming out at 4.9%. No stamp duty.

How does that sound?

Ultimately its personal choice as to what invest in.

You can earn 4.9% gross on deposit, hassle free.

So its whether you think there will be appreciation in the property value.

Pincher

Pennylane wrote: »

Coming out at 4.9%. No stamp duty.

How does that sound?

5% is a neutral breakeven point.

Assuming you are paying 5% interest, the rent is covering the outgoings. I know the rent is more than the mortgage payments, but there are void periods, maintenance, agent fees, etc.

So, whatever the capital gain is at the end of this exercise, that's your profit. The thing to remember is, you invested the deposit, not the price of the house. A house of £100k at LTV of 75% means you only put in £25k. If the house doubles after ten years, the capital gains is £100k, which is 400% Return On Capital.

The old BTL model worked on 95% LTV. If you bought in 1996, you could have got 10% yield, and paid 6% mortgage, which was sustainable if nothing went wrong. £100k capital gain on a £5k initial investment is 2,000% Return On Capital after ten years. This is the classic leveraged investment. People blame the bankers for taking big risks, but forget what they were doing themselves.

Pennylane

Thrugelmir wrote: »

Ultimately its personal choice as to what invest in.

You can earn 4.9% gross on deposit, hassle free.

So its whether you think there will be appreciation in the property value.

But we also want a house and we want THAT house for child, as I've already said. Because of its location, access to amenities and closeness to us. If we drop dead then we can rest assured that said child will have a roof over their head.

Pennylane

Pincher wrote: »

5% is a neutral breakeven point.

Assuming you are paying 5% interest, the rent is covering the outgoings. I know the rent is more than the mortgage payments, but there are void periods, maintenance, agent fees, etc.

So, whatever the capital gain is at the end of this exercise, that's your profit. The thing to remember is, you invested the deposit, not the price of the house. A house of £100k at LTV of 75% means you only put in £25k. If the house doubles after ten years, the capital gains is £100k, which is 400% Return On Capital.

The old BTL model worked on 95% LTV. If you bought in 1996, you could have got 10% yield, and paid 6% mortgage, which was sustainable if nothing went wrong. £100k capital gain on a £5k initial investment is 2,000% Return On Capital after ten years. This is the classic leveraged investment. People blame the bankers for taking big risks, but forget what they were doing themselves.

Don't know what LTV is. We're paying a much bigger deposit.

Conrad

If anyone is SERIOUSLY interested, I have a yield above 10% on a block of German flats I own with a German lawyer that resides in London.

Looking to sell my share (50%) for about £85000. Very cheap - the block is in an underdeveloped part of East Germany but all the new tenants have been Polish as its right on the border and Poles there prefer German ammenities apparantly.
My German partner is utterly trustworthy, in fact he's an absolute stickler for procedure and rules!

There are several remaining empty flats we have'nt gotton round to renovating. Once renovated, renting is straight forward with ready demand.

If fully developed the yield could be in the order of 15%+

Tax is minimal as we exploit the 'legal' instruments available to us. The property is owned by our own UK limited co specifically set up for this sole purpose.



Why sell? I want to invest in a development project and need maximum cash.

Cash buyers only - mortgages are way too much hassle in Germany.

Worth noting the village is right on the border so benefits from the fact the border was recently made 'free' meaning citizens of both nations come and go freely (a bit like Austrian German French border area I know).

Also the worlds largest biofuel plant recently opened some 4km away. It takes waste green material and crop stems. Polands second largest port is 15km distant and a major economic hub.

Pennylane

Pincher wrote: »

5% is a neutral breakeven point.

Assuming you are paying 5% interest, the rent is covering the outgoings. I know the rent is more than the mortgage payments, but there are void periods, maintenance, agent fees, etc.

So, whatever the capital gain is at the end of this exercise, that's your profit. The thing to remember is, you invested the deposit, not the price of the house. A house of £100k at LTV of 75% means you only put in £25k. If the house doubles after ten years, the capital gains is £100k, which is 400% Return On Capital.

The old BTL model worked on 95% LTV. If you bought in 1996, you could have got 10% yield, and paid 6% mortgage, which was sustainable if nothing went wrong. £100k capital gain on a £5k initial investment is 2,000% Return On Capital after ten years. This is the classic leveraged investment. People blame the bankers for taking big risks, but forget what they were doing themselves.

3.89% interest. No maintenance for the forseeable future. All freshly decorated, fitted etc. I'd be happy to move in as it is. (And I'm quite fussy!:p)

Pennylane

Just putting this up for Pincher.