Renting yield return question

LEP

How do I work out the yield on a property I am going to let. These are the facts:

Value – approx. £85k
Outstanding mortgage - £54.7k
Monthly repayment - £413 of which at the moment approx £113 is interest
Rental income – after letting agent fees £396
Landlord insurance - £110 per year

Although the rental income does not cover the mortage payment the fact is most of what I will receive even after tax will be paying down capital so seems worth it to me.

If I sold it I'd end up with after legal fees about 29k which stuck in an account earning 4% would get me £928 interest a year which is far less than the amount of capital I'll be paying down each year on the mortgage.

Thanks
LEP

spadoosh

Yield = income - expenses
capital expense x 100

spadoosh

we could do with how much you paid for the property
and how much the letting agent fees are specifically.

or you could work it out yourself if you dont wanna tell us that.


(us being the 8 of me sat behind the computer!?!?!?!)

LEP

Paid 92k eight years ago for it.

Agent fees including vat at £54pcm i.e. rental income before these is £450pcm.

Thanks

DadDee

A simplistic calculation for this property yield is. ( assuming 10 months of occupancy to cater for vacant periods and other expenses

(Income-Expenses)/valuation

(396 - 110/12) * 10/85000 = 4.55%

spadoosh

Your getting about a 3.6% yield and thats including interest payments on the mortgage.

About a 5.04% yield excl cost of borrowing.



Sorry to say but damn thats gone down a bit, thought property didnt really drop that much below 2004 levels. Would understand if you bought 4 years ago but?!?!




Cheers DadDee, forgot to mention based on 12 months occupancy and ive gone with capital expenditure as its not a variable (depends how confident you are with the valuation)

LEP

spadoosh wrote: »

Your getting about a 3.6% yield and thats including interest payments on the mortgage.

About a 5.04% yield excl cost of borrowing.



Sorry to say but damn thats gone down a bit, thought property didnt really drop that much below 2004 levels. Would understand if you bought 4 years ago but?!?!

Yes that is what I thought. TBH the town I lived in (just moved) is flooded with properties in the 75-100k bracket which I think has driven prices down more than the national average.

Honestly, the amount up for sale on the neighbouring streets is ridiculous....

DannyboyMidlands

Is that BTL investors selling up because the returns are so bad? Or are owner occupiers deserting the area for some reason?