Nationwide Oct: +0.6%

Cunfaro

HAMISH_MCTAVISH wrote: »

And on a board set up for discussion of economic topics, you'd look a lot less silly if you understood basic economic terms.

Imputed rent is so broadly accepted it's even a component of GDP.

http://en.wikipedia.org/wiki/Imputed_rent

you'd look a lot less silly if you werent such an obvious stooge or troll.

Do you get paid to post your constant propaganda here?

IveSeenTheLight

the_flying_pig wrote: »

a few months ago, i can link to the thread if you like, we pretty much agreed that, nationwide [i.e. RMW nonsense aside], the average rental yield is about 5%. also that the average mortgage SVR is about 4%. i put it to you that 1% wouldn't be a particularly high figure to assume for maintenance. all in all your £10k a year figure is fanciful for all other than utterly exceptional cases.

Can I query, why is yield so low in the stats you refer to?
Is it measured on current value and current rents.

Of course, in reality, when your looking at this from an investment point of view, I prefer to negate the value in preference on calculating against the invested amount (or equity).

Similarly the rents is against the profits as opposed to the gross amount.

You'll be amazed how this affects the percentages.

e.g. £30k invested into a £150k property could provide a rent of say £900 pcm.

Normal rental yield works this out as (£900*12)/£150k*100% = 7.2%

However the mortgage is £120k and at a current average of 4% the monthly interest is £400, meaning there is £500 in available profit.

Of course there will be discussions on maintenance (incidently which is also tax deductable i.e. you can claim 10% off the profits against wear and tear, meaning instead of tax on the £6,000 profits, you are liable for only tax on the £4920 i.e. £1080 tax free

Lets assume you need all of that £1080 allowance for maintenance (not that high in my experience, you are still making a £4920. Less 20% tax it's £3936. There may be ways to reduce the tax further so lets go with that figure.

£3936 return for investing £30,000.
That's 13.12% Nett profit on the investment.

Now of course, if valuation increases, it increases the equity and reduces the Rental Yield, but we also see rent increases.

Not all properties are viable investments but many are.

P.S. to pre-empt the "you can;t get that rent for that property type"

No 38 £124,000
http://www-g.aspc.co.uk/cgi-bin/public/LiveProperty/303626?ID=FAPOJEJL#picture

No 27 £900 pcm
http://www-g.aspc.co.uk/cgi-bin/public/LiveProperty/303794?ID=FAPOJEJL#picture

chucknorris

IveSeenTheLight wrote: »

Of course, in reality, when your looking at this from an investment point of view, I prefer to negate the value in preference on calculating against the invested amount (or equity).

I don't think many non investors appreciate that the initial gross yield is only really of any use for a quick comparison of different property investments. As you say it doesn't give the whole story and doesn't tell you much about the profitability and return on the funds actually invested.

ruggedtoast

I do enjoy these discussions!

Graham_Devon

ruggedtoast wrote: »

I do enjoy these discussions!

Yer, well, not so much here! It's like groundhog day.

Graham: "You have saved 10k Hamish, that is all".

Hamish: "you really don't understand, I have saved 10k"

Graham: "yes Hamish, that's why I said you saved 10k, bizarely enough"

Wotsthat: "No you don't understand. He's saved 10k"

Joe enters with some context stripping, twisting nonsense implying what I actually stated all along is that it's better to rent than own!

No....it's all a little tiring!

IveSeenTheLight

Graham_Devon wrote: »

Yer, well, not so much here! It's like groundhog day.

..........



No....it's all a little tiring!

Move on then, I thought the conversation had.

ruggedtoast

Graham_Devon wrote: »

Yer, well, not so much here! It's like groundhog day.

Graham: "You have saved 10k Hamish, that is all".

Hamish: "you really don't understand, I have saved 10k"

Graham: "yes Hamish, that's why I said you saved 10k, bizarely enough"

Wotsthat: "No you don't understand. He's saved 10k"

Joe enters with some context stripping, twisting nonsense implying what I actually stated all along is that it's better to rent than own!

No....it's all a little tiring!

You're plucky I'll give you that Graham. Plucky and game.

the_flying_pig

IveSeenTheLight wrote: »

Can I query, why is yield so low in the stats you refer to?
Is it measured on current value and current rents.

Of course, in reality, when your looking at this from an investment point of view, I prefer to negate the value in preference on calculating against the invested amount (or equity).

Similarly the rents is against the profits as opposed to the gross amount.

You'll be amazed how this affects the percentages.

e.g. £30k invested into a £150k property could provide a rent of say £900 pcm.

Normal rental yield works this out as (£900*12)/£150k*100% = 7.2%

However the mortgage is £120k and at a current average of 4% the monthly interest is £400, meaning there is £500 in available profit.

Of course there will be discussions on maintenance (incidently which is also tax deductable i.e. you can claim 10% off the profits against wear and tear, meaning instead of tax on the £6,000 profits, you are liable for only tax on the £4920 i.e. £1080 tax free

Lets assume you need all of that £1080 allowance for maintenance (not that high in my experience, you are still making a £4920. Less 20% tax it's £3936. There may be ways to reduce the tax further so lets go with that figure.

£3936 return for investing £30,000.
That's 13.12% Nett profit on the investment.

Now of course, if valuation increases, it increases the equity and reduces the Rental Yield, but we also see rent increases.

Not all properties are viable investments but many are.

P.S. to pre-empt the "you can;t get that rent for that property type"

No 38 £124,000
http://www-g.aspc.co.uk/cgi-bin/public/LiveProperty/303626?ID=FAPOJEJL#picture

No 27 £900 pcm
http://www-g.aspc.co.uk/cgi-bin/public/LiveProperty/303794?ID=FAPOJEJL#picture

two examples of high yields is hardly a substitute for a nation- or region-wide survey. these discussions must always deal with averages, otherwise they become stupid, e.g. 'if someone's renting from a friend who only wants a 1% yield, then it's loads cheaper to rent', etc. has to be about averages.

as for your calculation, well, i don't understand why you bothered. it's over-elaborate & actually loses some of the insights that yield gives you.

your calculation, your, what shall i call it, a kind of post tax return on equity, it's unduly influenced by a transient factor, namely interest rates. best not to conflate two very different questions of what the yield is & what the cost of borrowing is, along with a third factor [namely capital structure]. best to look at them all seperately.

the_flying_pig

If you substitute your 5% yeald into figures the yeald on £30k would still be about 10%

the return on equity would still be about 10%, yes.

but that's a very particular thing.

ukcarper

the_flying_pig wrote: »

the return on equity would still be about 10%, yes.

but that's a very particular thing.

I deleted post because I made a mistake and it would be about 6% but thats twice most banks pay.