Landlords: what's your NET rental yield?

Credit-Crunched

HappyMJ wrote: »

I paid £20,000 for my share (the deposit) of my property in 2002 and borrowed the remainder on an interest only basis. The interest rate on the £60,000 borrowed is a SVR mortgage currently at 4%. I let the property out for £600 per month. I don't pay tax as my profits and other income is less than £10,000. The annual expenses are just the gas safety certificate at £50. I don't have landlord insurance and choose to self insure. It's now worth £145,000 the capital return averaged over 13 years is £5,000 per year so the total return on investment is...23.75% income plus 25% capital...48.75% return on funds invested. Is that right?

Lets hope that your Tennant does not walk out with all your copper, or that 48.75% will be wiped out in a heart beat! :rotfl:

No insurance?! Crazy. Was it not a condition of your mortgage offer?

redux

masonic wrote: »

I suspect the person that has voted 20%+ isn't calculating on that basis, or they are renting out their shed.

... or tents on a campsite

chucknorris

Credit-Crunched wrote: »

Lets hope that your Tennant does not walk out with all your copper, or that 48.75% will be wiped out in a heart beat! :rotfl:

No insurance?! Crazy. Was it not a condition of your mortgage offer?

I don't think insurance is worth it either, I tend to self insure too, including my home. You should only have insurance when you can't afford the downside, don't want to risk the downside or if it is a legal requirement (like car insurance, which of course I do have).

HappyMJ

Credit-Crunched wrote: »

Lets hope that your Tennant does not walk out with all your copper, or that 48.75% will be wiped out in a heart beat! :rotfl:

No insurance?! Crazy. Was it not a condition of your mortgage offer?

Yes...I was offered the mortgage subject to taking out a policy with the bank. I subsequently cancelled it.

Why crazy? Is insurance always required. I self insure almost everything I don't see a problem with that. I self insure my pets, my mobile, my home contents, my boiler and heating system, the water supply pipe, internal plumbing and drainage, the electrics, my health, my income, my landlord liabilities and my house. I don't take out travel insurance or life insurance. I've never taken out payment protection on credit cards and loans. It saves me a fortune. What's the worst that could happen? I lose everything and start again...I really don't care.

I do however take out insurance on my car to cover third parties which I could never afford to cover myself (if I have a bump or scrape I fix it myself at my own expense or ignore it and do not claim. I've never had a car worth much more than £1,000) and I cover any other third party risks such as my employers liability, public liability and professional indemnity.

atush

We have someone on the pensions forum right now who is renting their at a loss, so amend your poll for a true picture

Credit-Crunched

HappyMJ wrote: »

Yes...I was offered the mortgage subject to taking out a policy with the bank. I subsequently cancelled it.

Why crazy? Is insurance always required. I self insure almost everything I don't see a problem with that. I self insure my pets, my mobile, my home contents, my boiler and heating system, the water supply pipe, internal plumbing and drainage, the electrics, my health, my income, my landlord liabilities and my house. I don't take out travel insurance or life insurance. I've never taken out payment protection on credit cards and loans. It saves me a fortune. What's the worst that could happen? I lose everything and start again...I really don't care.

I do however take out insurance on my car to cover third parties which I could never afford to cover myself (if I have a bump or scrape I fix it myself at my own expense or ignore it and do not claim. I've never had a car worth much more than £1,000) and I cover any other third party risks such as my employers liability, public liability and professional indemnity.

Some of those I understand, but not taking our travel insurance is bonkers! I broker my arm in the USA and the bill was over £5k, and they would not proceed until the confirmed I had payment in place.

I had a bad tenant, who did exactly that, ripped out all copper pipes from the walls and floors. My insurer paid out over £15k to put it back to good. Small peace of mind for £19.77 a month.

Horses for courses thought.

ViolaLass

HappyMJ wrote: »

I paid £20,000 for my share (the deposit) of my property in 2002 and borrowed the remainder on an interest only basis. The interest rate on the £60,000 borrowed is a SVR mortgage currently at 4%. I let the property out for £600 per month. I don't pay tax as my profits and other income is less than £10,000. The annual expenses are just the gas safety certificate at £50. I don't have landlord insurance and choose to self insure. It's now worth £145,000 the capital return averaged over 13 years is £5,000 per year so the total return on investment is...23.75% income plus 25% capital...48.75% return on funds invested. Is that right?

No repairs or upgrades in that time?

Biggles

HappyMJ wrote: »

Yes...I was offered the mortgage subject to taking out a policy with the bank. I subsequently cancelled it.

I thought mortgages were always offered subject to you taking out buildings insurance. Yes, they used to insist the policy was with the bank/BS/whatever but they have to accept you going elsewhere these days.

I do cut back on insurance myself these days and, where I do have it, keep the premiums down by having large excesses. But I will always have buildings insurance and travel insurance; if the house is burgled, I could dig out a few grand to replace what was stolen. But if it burned down, I wouldn't be able to find £300,000 to rebuild it. And repatriation costs with medical facilities could be prohibitive too (and, as Credit-Crunched said, they would want proof of cover, not a promise that you would raid your savings accounts when you got home).

bigadaj

You can certainly be over insured, or be in a position where it doesn't provide value for money, but having no insurance for holidays or property does seem a bit mad.

Both insurances are relatively low cost and cover you for an admittedly low risk but potentially very high cost outcome. No house insurance and that's a problem if your house burns down, let alone vandalism, subsidence or any number of other risks. Getting any sort of medical problem abroad would be massively expensive as others have noted. I've always avoided PPi, extended warranties and all manner of dodgy insurance type products but there's certain things that are essential.

Basic house and travel insurance are also incredibly cheap in my opinion, annual travel policies for £50 a year or less, and my house insurance is well under a £100 with a big insurer, having claimed a total of well over £15k over the last fifteen years.

Pincher

A £200k property in 1998 was generating £20k, so 10% yield gross, £14k after expenses, so 7% net before tax.


The same property is now worth £800k, generating £30k, so 3.6% gross yield, £23k after expenses, so 2.9% net before tax.


Note that this is without mortgage.
With leverage through borrowing, the return on capital should be higher.


It also ignores the £600k capital gains.


Assume the net income was about £300k over 17 years, so an initial £200k investment has generated £900k (=£600k gain + £300k net income) profit, or 450%.


£200k becoming £1,1million in 17 years is 10.5% compound growth. I.e. if you put £200k in a cash ISA that paid 10.5% interest a year, it will become £1.1million after 17 years.