Gross Yield - What is it???

RHemmings

BobProperty wrote:

Not enough for me and the yield will fall somewhat when you have to do all the HMO work. :eek:

10.9% is not enough for you? What would you consider a good yield? I presume that you're an experienced landlord, not a johnny-come-lately. Are you?

BobProperty

RHemmings wrote:

10.9% is not enough for you? What would you consider a good yield? I presume that you're an experienced landlord, not a johnny-come-lately. Are you?

Oh you haven't been here longer enough, have you? 15% or 10-12% in a rising market - which we definately haven't got now. I was never into it on a large scale ( I have met people with portfolios of 30+ houses and a business partnership which owned about 120-130 last time I spoke to them). I'm glad I'm out of it now, the laws in favour of the tenant are bordering on the ridiculous, the market is due a huge correction and there are too many people in the business who don't know what they are doing/talking about. I'll be buying again in a few years after the crash.

RHemmings

BobProperty wrote:

Oh you haven't been here longer enough, have you? 15% or 10-12% in a rising market - which we definately haven't got now. I was never into it on a large scale ( I have met people with portfolios of 30+ houses and a business partnership which owned about 120-130 last time I spoke to them). I'm glad I'm out of it now, the laws in favour of the tenant are bordering on the ridiculous, the market is due a huge correction and there are too many people in the business who don't know what they are doing/talking about. I'll be buying again in a few years after the crash.

I can't imagine yields getting to 15%. Maybe because I haven't been thinking of a long enough time frame. In a high inflation environment, then maybe you'd need high returns such as what you say, but only if prices were going up (and savings returns high) while house prices remain static. In other words a real, but not nominal, house price crash. And 10-12% return in a rising market? If those are real house price rises and inflation isn't too high, then I would consider 10-12% return to be a licence to print money. OK, particularly if it's an HMO then there's a lot of work involved in being a landlord.

I do believe that eventually rental yields will return to previous levels, as eventually price rises must stop. And I thought that landlords will start looking for 8% or so. But you just way out-bear me on this one if you expect 10-12%, and then in a rising market! Did the yields even get that good in the mid 90s when property was undervalued?

BobProperty

If I remember correctly my first investment property cost me about £10k and rented for about £1.6k-2k. That was mid 80s. Until the last few years 10-12% on an HMO was almost the norm. Someone found one on here a few months back, I think in a student area in Leeds, so they do exist, even now.

RHemmings

BobProperty wrote:

If I remember correctly my first investment property cost me about £10k and rented for about £1.6k-2k. That was mid 80s. Until the last few years 10-12% on an HMO was almost the norm. Someone found one on here a few months back, I think in a student area in Leeds, so they do exist, even now.

I'm definitely taking too short a view on the renting of properties. I guess people like yourself must think 3-4% yields even more insane than I do.

BobProperty

RHemmings wrote:

I'm definitely taking too short a view on the renting of properties. I guess people like yourself must think 3-4% yields even more insane than I do.

Oh yes! When you take into account the effort you put into the business (for that's what it is), plus all the things that occasionally go wrong, then you are definately better off with the money in the bank. I decided a few years back that I wasn't looking at this business properly and gave myself an extra rule (in addition to the 15% yield rule) which was if it was worth more to me to sell a property (to pay off my mortgage or just get a return in the bank) then I should do so.
No one with half a brain would buy and run a small business for less than 20% return, yet apparently people are willing to become landlords for a 3-4% return, expecting a massive capital gain whatever the state of the market. A regular on here (Clutton?) has already talked about buying out failed BTLers. I might look at that in a few years, but I think the long hold, big money will be made in reversions and BMV buying by then.

Leighthal

Strangely, when I took a postcode from Brereton road and searched on it in rightmove for 5 beds or more, your property didn't come up. Oh, your property is under offer. Is it you making the offer?

I'm not making the offer,no.I just posted this to demonstrate that there are still oppertunities available for higher yields.This place on Brereton Avenue is not common of the whole area though.Most are 3 Bed terraced houses,so this is obviously a conversion.
I just wonder why the current owner is off-loading with this yield?

BobProperty

Leighthal wrote:

I'm not making the offer,no.I just posted this to demonstrate that there are still oppertunities available for higher yields.This place on Brereton Avenue is not common of the whole area though.Most are 3 Bed terraced houses,so this is obviously a conversion.
I just wonder why the current owner is off-loading with this yield?

I'd suspect it could be what has already been pointed out, this will be an HMO and may already be fingered by the council for some serious work being needed.

Xbigman

Just to muddy the historical yield / current yield debate. This is exactly the same situation as anyone investing in the stockmarket for the dividends (specifically the High Yield Portfolio strategy). You can work out your yield vrs the original share value or the current share value and both have merit. To my mind however the best way is to use both figures but adjust them both for inflation. That gives you a true picture of historical growth in your investment. When comparing to other investments that concentrate on yield you need to use the yield vrs current valuation of shares/property (without factoring inflation) as that is how everyone else is going to quote their yields and it otherwise gets very confusing.

I also think the savings account comparison is a bad idea. If you get 55% interest after 9 years you don't also get the savings account itself increasing/decreasing in value as a house or share would. You are effectively comparing apples and pears.
Regards



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