What income can I expect from £1m+?

Linton

cedarmay wrote: »

.....

Some of the income funds suggested match and exceed this performance (at least over a few years), but the fees! When the AMC fees are around 5-7% that doesn't seem to leave much margin for a dip in performance before the fund managers would make more than the investors. Which worries me when it's my money taking the risk, and the fund managers getting more than me when the fund under-performs.

Where do you get the figure of 5-7% AMC from?? Published Income fund AMCs are typically 1.5%, and that will include commission paid to the online broker which is often fully or partially refunded.

JohnRo

A great many clean priced funds are comfortably sub 1.0%, albeit with an explicit platform charge to add if that option is required.

cedarmay

Linton wrote: »

Where do you get the figure of 5-7% AMC from?? Published Income fund AMCs are typically 1.5%, and that will include commission paid to the online broker which is often fully or partially refunded.

I was referring to the funds someone suggested earlier as a way to have exposure to property rather than through my under-performing BTL portfolio:

F&C UK Real Estate Investments Ltd
Picton Property Income Limited
Schroder Real Estate Investment Trust

The yields are 6.6%, 5.9%, and 5.44%, growth 3 years annualized 6.32%, 12.44%, and 14.43%. But the annual fees are 2.51%, 6.97%, and 3.9%

I wouldn't want to invest in a fund with high annual fees because future performance isn't guaranteed and the fees are payable anyway.

More importantly as someone else pointed out, these funds appear to be digging into reserves to maintain the high yield, which means it could well be cut back in future.

The above were suggested as an alternative way to match or improve on my Buy to Let investment return targets of 5%+ yield and 5%+ growth.

Linton

cedarmay wrote: »

I was referring to the funds someone suggested earlier as a way to have exposure to property rather than through my under-performing BTL portfolio:

F&C UK Real Estate Investments Ltd
Picton Property Income Limited
Schroder Real Estate Investment Trust

The yields are 6.6%, 5.9%, and 5.44%, growth 3 years annualized 6.32%, 12.44%, and 14.43%. But the annual fees are 2.51%, 6.97%, and 3.9%

I wouldn't want to invest in a fund with high annual fees because future performance isn't guaranteed and the fees are payable anyway.

More importantly as someone else pointed out, these funds appear to be digging into reserves to maintain the high yield, which means it could well be cut back in future.

The above were suggested as an alternative way to match or improve on my Buy to Let investment return targets of 5%+ yield and 5%+ growth.

I think you will find that the high fees are because these particular funds directly own property rather than investing in the shares, which is what most funds do. Managing property is a lot more expensive than managing paper investments.

Note that the quoted yields are after fees have been taken.

cedarmay

Linton wrote: »

I think you will find that the high fees are because these particular funds directly own property rather than investing in the shares, which is what most funds do. Managing property is a lot more expensive than managing paper investments.

Note that the quoted yields are after fees have been taken.

That puts the fees in a whole new perspective. In that context they seem reasonable!

ds1980

basically you cant. I have links to studios that will achieve about £600-£625pm and cost less than £100k they are in en8 though which is hardly london but i do wonder what people are doing when they are buying these places with such low yields. There are maintenance fees which has a big impact on profit so hardly world beating.

£5k in agent fees and with voids you should be shot! Unless you're renting by the room yields higher than about 8% are simply not achievable IMHO or i havent found them yet.

cedarmay

ds1980 wrote: »

basically you cant. I have links to studios that will achieve about £600-£625pm and cost less than £100k they are in en8 though which is hardly london but i do wonder what people are doing when they are buying these places with such low yields. There are maintenance fees which has a big impact on profit so hardly world beating.

£5k in agent fees and with voids you should be shot! Unless you're renting by the room yields higher than about 8% are simply not achievable IMHO or i havent found them yet.

Why is £5k in managing agents fees so bad? Their fee is 1/12th of the annual rent, about 8%. Not unusual, although some letting agents would charge 10% for a full management service. What's wrong with having voids - tenants change and I've factored in how often that happens on average to arrive at my net yield figure of 3%.

Conrad never came back with the full costs for the London properties he says he purchases for £110,000 and let for £800 pm. But I think I know why they are so cheap. Short leases. So that would sacrifice capital appreciation for 8%+ yield.

Anyway this thread has gone off topic in that my pension is already £1.3m of property and only £250,000 in equities. Maybe I could get a little more net yield by selling one or two and buying higher yield properties. But I think the consensus here was correct that I should diversify by selling the lowest yielding properties, and buying a fund that would at least match the yield (5% net)and capital growth (5%), that I can get from my better performing properties.

My still unresolved question is, which fund or what investment meets this criteria?

atush

Just like you can't guarantee growth in property, you can't with funds. Many good investment trusts have raised their Dividend every year for 40 years or more, so that could be a guarantee of a kind. But market falls are just that, they happen (and even happened in london property).

If you are happy with the income, and the dividend history then rises and falls in market value of the shares has less importance, if you are happy that they will recover after market falls eventually.

Some years you'll get your 5% growth, some years 10-20%, some years down 5% etc.

ds1980

Wow! you're happy to give away 8% before you've even started!!

Imagine paying a fund 8% that grows 5% per annum!

Wise up!

I wouldnt buy any funds but that's a different story! IT's might be a way for you to go. Go to fool.co.uk and do some research on them. I'm in a similar position to yourself but i dont necessarily see this as a problem at present.

gl

Linton

ds1980 wrote: »

Wow! you're happy to give away 8% before you've even started!!

Imagine paying a fund 8% that grows 5% per annum!

Wise up!

I wouldnt buy any funds but that's a different story! IT's might be a way for you to go. Go to fool.co.uk and do some research on them. I'm in a similar position to yourself but i dont necessarily see this as a problem at present.

gl

Err its 8% of the rent, not 8% of the capital value.