BTL and gross yields

RHemmings

CB1979 wrote:

well my 2 bed flat that i've just bought is £167k (of which £165k is mortgage)

total monthly mortgage payments (on the "dreaded" Interest Only mortgage) is £550ish, rental income £800 a month.

minus £50 a month for insurance/miscellaneous expenses.

Your gross yield is 5.7%.

btw looks like I'm going privately letting rather than through an agent as they all want near on £100 a month for not doing much bar findind the tenant.

so obviously if i had to pay that as well, would knock down "profit" even more.

ps this is due to circumstances that I'm letting out for 3-6 months not as a BTL property.

but to answer your original q,

personally think landlords are "happy" with 4% yields, as there assets are still going up in value, just as long as they have a "sound" property, ie elecs/plumbing are 100%, I for one would definately not do it, if i thought that i would be having to spend out cash each month to fix/repair problems.

A sufficient number of landlords appear happy with 4% yields to keep on buying properties at current prices. But, if sentiment should change so that landlords expect an 8% yield on property, then that would be an interesting change. For example, the value of your flat to a potential BTL purchaser would only be £120,000.

In the past it was typical that a landlord would look for an 8% gross rental return on property. If those days return, then that by itself could be enough to cause a sizeable crash in the property market.

F_T_Buyer

I've had this conversation many many times. Most people who invested don't look at yields, infact I would say half of those people don't understand yields at all. The other half work out yields on what they paid, rather than current value. But this is just not looking at the full picture, and kidding yourself about your investments.

Many people I have spoke to, including discussions on here think property prices will rise, so it is ok to take on a property at pathetic yields. But this group isn't investors, they are speculators.

The worst reason to invest in something is because it's rising in value - Warren Buffet.

RHemmings

F_T_Buyer wrote:

Many people I have spoke to, including discussions on here think property prices will rise, so it is ok to take on a property at pathetic yields. But this group isn't investors, they are speculators.

The worst reason to invest in something is because it's rising in value - Warren Buffet.

So will this sentiment, and the makeup of people buying properties to let, change?

libitina_2

The only people who will make any money from BTL in the coming hpc and recession will be professional ll's who know their onions and bought way before the peak of 2004. imo of course.

RHemmings

libitina wrote:

The only people who will make any money from BTL in the coming hpc and recession will be professional ll's who know their onions and bought way before the peak of 2004. imo of course.

But even they will lose a considerable amount of paper wealth. And if there's to be a crash, the real professionals will be those who sell before the peak, and buy in the trough.

gallygirl

F_T_Buyer wrote:

I've had this conversation many many times. Most people who invested don't look at yields, infact I would say half of those people don't understand yields at all. The other half work out yields on what they paid, rather than current value. But this is just not looking at the full picture, and kidding yourself about your investments.

Many people I have spoke to, including discussions on here think property prices will rise, so it is ok to take on a property at pathetic yields. But this group isn't investors, they are speculators.

The worst reason to invest in something is because it's rising in value - Warren Buffet.

Don't forget the other side of the picture. I would not buy a BTL on a 4.7% yield. However, I am v happy that 1 of my BTL's has a yield of this. Why - because it's value has gone up so much. Bought for 27k, just sold for 89k. I am obviously far happier than if I had been getting a yield of 8.4% because the property was only worth 50k. (BTW am selling in preparation of leaving area, not because no longer happy with BTL. But I repeat that i wouldn't BUY on a 4.7%).

richgirl

So why hold at 4.7% ? or will you be happy when your yield is back to 8.4% due to a fall

PoorDave

libitina wrote:

Do newbie btl's/ average Joe public even understand yields?

I love the way (jealous?) people on MSE seem happy to portray BTL LL's as toothless chav/working class simpletons who have no idea about money.

libitina_2

PoorDave wrote:

I love the way (jealous?) people on MSE seem happy to portray BTL LL's as toothless chav/working class simpletons who have no idea about money.

Jealous of what exactly?
My savings work better for me in this climate tucked away in a building society. At this moment in time I would not risk my hard earned cash in something as risky as BTL. With the benefit of hindsight though, I may have considered it 5 years or so ago.

And when the 'toothless chav/working class simpletons who have no idea about money' start thinking BTL is a good thing, it's definately time to get out.

lynzpower

Im with libitina this isnt snobbiness.

Personally, pre-mse I thought the BTL idea would make me a miliion, but obviously, it wont. Now, recently, we have heard from a couple of people who do BTL. One of them temps with my partner on 8.00 an hour in central london. He has remortgaged himself to the hilt for 2 BTLS and one of them is void and the second hes sort of living in and trying to find lodgers at WAY below market rate as hes broke. He was advising us to get into it. I told OH to go back & discuss yeilds with him, if hes looking over 6% ill listen more to what hes saying. Apparently my OH baffled him completely

Hey this aint snobbery, its people like him I want to be renting off,who are so desperate for the cash, they are going below market rate, in quite a big way. More cash for me!