BTL - profit margins?

doughnutmachine

I have a flat that I rent out:

Income

about £450 a month. ie £4950 a year assuming 11 months rent a year.


Outgoings

letting agent a standard 10% a month plus vat ie 12% or £600 a year
letting agent fees for finding new tenants/ periodic checks/ certificates etc about £500 a year
factors fees for grasscutting/ insurance/ cleaning about £700
sinking fund for bathroom/ kitchen/ boiler/ maintenance/ painting/ carpets etc about £1000


so my net income is about £2200 a year on a flat worth £85k. then if I factor in my time doing stuff like speaking to my agent or organising a new boiler that £2200 goes down further... imho btl for single flats is a mugs game.

I honestly think people buy BTL flats as a type of status symbol, I really cant see anyone looking at realistic figures and thinking it's a good investment......

chucknorris

tim123456789 wrote: »

"completely flat, except for inflation" is not completely flat, it is growth

completely flat is completely flat I.e the cash price is exactly the same as now

HTH

tim

Additionally inflation only growth is still very good because if the property was bought with only say a 25% deposit i.e. 75%mortgage (plus fees etc obviously) you get 100% of the capital growth for only 25% (plus) fees invested.

Thrugelmir

Lizling wrote: »

E.g. For a 200k flat and a mortgage of £150k at 5%, if tenants paid rent exactly equal to the mortgage and to keep things simple, there were no additional costs (i.e. no monthly profit or loss at all) you'd have paid off about £111k after 10 years at today's prices.

You are overlooking tax. If the mortgage interest is £800 per month. Then the rental income would need to be £1,000 at basic rate tax of 20%, and £1,333 at 40% higher rate.

chucknorris

Thrugelmir wrote: »

You are overlooking tax. If the mortgage interest is £800 per month. Then the rental income would need to be £1,000 at basic rate tax of 20%, and £1,333 at 40% higher rate.

He didn't overlook tax because the mortgage interest is an allowable expense, so the tax return calculation doesn’t work that way, below is a simplified tax calculation based on the information provided:

£800 Rental income

(£80) Less 10% wear and tear (if furnished)

£720 Sub-total

(£800) Less all expenses (maint, mortgage int etc.)

(£80) Loss (if furnished), if not then profit = 0

I have ignored the fact that the poster you were responding to had factored in a repayment mortgage, rather than interest only for simplification. The difference of course would be that the repayment element of a mortgage is not allowable as an expense.