Buy-to-Let high yield locations...

RHemmings

Alan_M wrote:

Correct if there is no outstanding loan on the property.

However I'd hazard a guess this isn't the case in say - 80% of BTL's so the relevant figure is then based on the value of the property the day the loan was drawn down. After all, if you own a £250,000 property with a £125,000 mortgage, you don't have £250,000 to plonk in a bank account if you sell - you have £125,000.

You've just not taken into account the effect of borrowed money on the calculations.

So comparing Yield to a bank account you have to remove the existing debt from the value of the property to arrive at a true figure. i.e - what would the yield be on the equity, not the total value.

However, now you've highlighted how much you can earn from a zero risk investment you'll understand why the professional investors who own without debt are now disposing of their let properties.

Yes, that's a good point. I was thinking of examples where the house was wholly owned. So when calculating yield the current equity of the house (depending on the current value rather than the original purchase price) should be used.

Mrs_pbradley936

Alright you two answer me this.

I bought 3 flats for 60K each about 11 years ago. I put the mortgage on my own house (which was by then mortgage free) I actually borrowed 150K interest free and offset because I had some money from another source. I get the interest payment off my tax (well at least my accountant says I do). So my original investment of say 30K (the amount of cash I had ) has now become 420K if I sold them at 140K which I am not thinking of doing. If I pay back the mortgage I am left with 270K (420 – 150 =270).

Would I have had 270K if I put 30K in a bank account?

irnbru_2

pbradley936 wrote:

Would I have had 270K if I put 30K in a bank account?

Your 30K would have risen to 47K given an average of 4% interest rate.

150K + 30K would have given you 127K once you'ld paid back your 0% borrowings.

(If it's assumed inclusive of tax deductions etc.)

Alan_M_2

£30K for 11 years at a compound rate of 5% per annum would have resulted in around £51,000.

You've also invested £150,000 of borrowed money and benefited on the capital increase of that borrowed money (leverage).

So any form of risk free investment wouldn't return anywhere near what you have, the big mistake many people make is assuming what has happened to you, will happen to them, no matter when they enter the market.

As with any investment, timing is everything.