BTL - At what price is this feasible?

Jaynorth_2

kingstreet wrote: »

I think it's fair to say the answer, as unhelpful as it inevitably is, will be "as little as they can possibly get away with."

All you can do is keep the price you're asking under review. If you're getting no viewings, it may be overpriced. If you're getting viewings but no offers, it's probably the property itself...

Fair enough, I just went back on to the market last weekend and have had 1 viewing from a FTB, zoopla stats are very high but nobody else has contacted the EA to view, I suppose it was too much to expect people to be kicking down the door just to view so I will just have to be patient.

Jaynorth_2

Jimbo1976 wrote: »

Ok lets take missile's desire for a 7% yield.

if you flat rents out for £900pm, then thats £10,800 per year. If missile wants a 7% yield then that would indicate a value of £154,285

If we take a lower yield say 5% then that gives a value of £216,000

So there is a huge variance depending on what yield a BTL investor wants.

You are better off using local sold prices from a property portal to assess the value of the property

What formula do you use to calculate the yield and is missile's desire for a 7% yield a commonly held opinion amongst BTL investors?

Wobblydeb

What is the monthly service charge? I would be looking to knock that off any anticipated rental before calculating yield/potential sales price.

Jaynorth_2

Wobblydeb wrote: »

What is the monthly service charge? I would be looking to knock that off any anticipated rental before calculating yield/potential sales price.

Service charge is paid twice yearly, usually between £350 and £400 every 6 months.

Wobblydeb

Jaynorth wrote: »

What formula do you use to calculate the yield and is missile's desire for a 7% yield a commonly held opinion amongst BTL investors?

Yield is simply annual rental (less any unavoidable fees such as monthly service charge) divided by purchase price.

7% seems reasonable. It would be lower if there was a possibility of large capital appreciation - e.g. London. Higher if there was additional hassle and or costs - e.g. HMO or houses in rundown areas.

http://www.thesundaytimes.co.uk/sto/style/homes_and_gardens/Move/article873346.ece

So..... £10,800 - £800 = £10k per annum. I would target 8% yield (remember this is before accounting for voids). £10k / 0.08 = £125k.

Jaynorth_2

Wobblydeb wrote: »

Yield is simply annual rental (less any unavoidable fees such as monthly service charge) divided by purchase price.

7% seems reasonable. It would be lower if there was a possibility of large capital appreciation - e.g. London. Higher if there was additional hassle and or costs - e.g. HMO or houses in rundown areas.

http://www.thesundaytimes.co.uk/sto/style/homes_and_gardens/Move/article873346.ece

So..... £10,800 - £800 = £10k per annum. I would target 8% yield (remember this is before accounting for voids). £10k / 0.08 = £125k.

Well I'm outskirts of London so not too sure if there will be any large capital appreciation anytime soon, but if investors are looking at yields from 7% upwards then it looks like I will not be attracting or selling to an investor.

And using that formula it looks like the last BTL investors that bought a flat in my block obtained a 6% yield. thanks

Wobblydeb

Well that gives you an indication of what yield is achievable for your block. Typically investors will buy at lower prices than people buying somewhere to live.

moneyistooshorttomention

missile wrote: »

I would be looking for 7% yield

Okays then...I am still in the position where my house will be "on the market" shortly and I anticipate that both first-time buyers and buy-to-letters will be looking at it.

My house is due to be priced at £175,000 and it would be around the £750 per month mark if it were rented out.

From that - I am wondering if BTL'ers would find the "yield" suitable for their requirements or no.

So - my guesstimate would be that BTL'ers would decide my house wouldnt have a sufficient "yield" for them on the one hand - BUT might take into account that I am in a reasonably "desirable" part of the country and house prices are accordingly not going down. They arent going up either - but have stayed static for the last few years as far as I can see - thus I would think my house wouldnt turn out much income for them, BUT would be a way to "stash cash" to keep it safe (ie because of a location that isnt losing value).

I have no idea how to work out whether BTL'ers would think my house was suitably priced for the yield they require or no. I am equally prepared to sell to a home-owner or a BTL'er - but, either way, the house will be sold for "what its worth" (and not some lower price designed to give "desired yield"). Its worth what its worth - and it will be "Pay it - you get it" and "Dont pay it - I wait for the next offer" regardless of who wants it.

What percentage yield would my £175k house have at that standard rent level for houses like this in this area (ie that £750 per month) please?

kingstreet

5.14%.

£750 x 12 = £9,000 / £175,000 = 0.0514 or 5.14% per annum.

unkle

I'm sorry to say it's unlikely you'll get an investor interested anywhere near that price.

On the outskirts of London £150k buys me a 2 bed flat that rents for £850-£900, in fact £142,500 for cash is more realistic.

£750 a month for £175k investment won't attract anyone IMHO.