Landlords: what's your NET rental yield?

remorseless

Biggles wrote: »

Against original cost of property? Current valuation of equity?

Just too many variations; not really a suitable subject to a simple 'Poll', so no point voting at all.

hmm maybe I see it too simple but I thought that Net Rental Yield is: (Purchase Price / Yearly Rent) - Deductibles Costs*

*some may have deductibles such as interests, some may not. The poll was/is about YOUR net rental yield not hypothetical if you could deduct this or that, blah blah

The current valuation of equity is not a purchase price and [to me] it's irrelevant unless you sell it.

Biggles

remorseless wrote: »

hmm maybe I see it too simple but I thought that Net Rental Yield is: (Purchase Price / Yearly Rent) - Deductibles Costs*

*some may have deductibles such as interests, some may not. The poll was/is about YOUR net rental yield not hypothetical if you could deduct this or that, blah blah

The current valuation of equity is not a purchase price and [to me] it's irrelevant unless you sell it.

Yes, but someone who inherited their property, or bought it 30 years ago, would be able to quote yields that were quite meaningless. Hence no point. But you'd have got more response on the House Buying, Renting & Selling board, which might have given you more meaningful figures. And if you're actually looking for recent purchase price v current net income, it would help if you then said so.

Eco_Miser

remorseless wrote: »

hmm maybe I see it too simple but I thought that Net Rental Yield is: (Purchase Price / Yearly Rent) - Deductibles Costs

(Yearly Rent - Deductibles Costs)/Purchase Price *100% would make a lot more sense.

masonic

remorseless wrote: »

hmm maybe I see it too simple but I thought that Net Rental Yield is: (Purchase Price / Yearly Rent) - Deductibles Costs*

*some may have deductibles such as interests, some may not. The poll was/is about YOUR net rental yield not hypothetical if you could deduct this or that, blah blah

The current valuation of equity is not a purchase price and [to me] it's irrelevant unless you sell it.

Someone who bought a house in 1983 for £30,000 who has now retired and moved to the countryside and rents out this property for £12,000 per year gross, or £10,000 after expenses. By your calculation (as corrected by Eco Miser) their rental yield is 33%.

The identical property next door was purchased last year for £180,000 by a hard working chap looking to invest some of the money he's saved from his quite comfortable salary in a passive income stream. He can also rent out at £12,000 per year, but has more expenses as he has an 80% BTL mortgage at 4.5% (currently interest is ~£6,500) to add to the same £2,000 other expenses, and he is a higher rate taxpayer, so after all that his net income is about £2,000 and his rental yield is about 1% (or a little under 6% if you calculate based on the amount of equity he has in the property). If he was able to buy outright using a lot of accumulated savings, his net yield would be a little over 3%.

So an identical property could be yielding 1%, 3%, 6% or 33% depending on how you do the calculation and the personal circumstances of the landlord.

Unless you have a time machine and can go back and purchase property at past prices, there is very little point in using figures from those who have based their answers on past prices. Similarly, comparing the net yield from a non taxpayer and higher rate taxpayer is fairly pointless.

remorseless

masonic wrote: »

Someone who bought a house in 1983 for £30,000 who has now retired and moved to the countryside and rents out this property for £12,000 per year gross, or £10,000 after expenses. By your calculation (as corrected by Eco Miser) their rental yield is 33%.

The identical property next door was purchased last year for £180,000 by a hard working chap looking to invest some of the money he's saved from his quite comfortable salary in a passive income stream. He can also rent out at £12,000 per year, but has more expenses as he has an 80% BTL mortgage at 4.5% (currently interest is ~£6,500) to add to the same £2,000 other expenses, and he is a higher rate taxpayer, so after all that his net income is about £2,000 and his rental yield is about 1% (or a little under 6% if you calculate based on the amount of equity he has in the property). If he was able to buy outright using a lot of accumulated savings, his net yield would be a little over 3%.

So an identical property could be yielding 1%, 3%, 6% or 33% depending on how you do the calculation and the personal circumstances of the landlord.

Unless you have a time machine and can go back and purchase property at past prices, there is very little point in using figures from those who have based their answers on past prices. Similarly, comparing the net yield from a non taxpayer and higher rate taxpayer is fairly pointless.

Totally. Any calculation is pointless if you start looking at all the possible conditions, hence I was asking about your yield. If the chap next door bought it expensive obviously his yield would be different and he would be 'voting' accordingly.

With your point of view there would be no point reporting anything because what is the point of saying folks are below minimum wage when there are people making lots of money? What is the point to say you need 20% deposit when buying a home when there're people who have homes and use those as collateral, etc

masonic wrote: »

So an identical property could be yielding 1%, 3%, 6% or 33% depending on how you do the calculation and the personal circumstances of the landlord.

Yes, and your yield is? 1, 3, 6 or 33%?

remorseless

Eco_Miser wrote: »

(Yearly Rent - Deductibles Costs)/Purchase Price *100% would make a lot more sense.

Thank you - yes... busy day!

chucknorris

bigadaj wrote: »

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.

Agree with holiday but not property (my home) insurance, the downside could be too high with a holiday (i.e. your life), but property insurance just isn't value for me. You don't just pay for the risk, you also have to pay for the overheads and profit of both the insurer and the broker. I'd rather just pay for the risk and self insure, which I have done for 10 years now.

chucknorris

remorseless wrote: »

The current valuation of equity is not a purchase price and [to me] it's irrelevant unless you sell it.

The net equity yield calculation is far from irrelevant! It is an important test of comparative profitability, to see whether it is worth retaining the investment or not, by comparing it to other possible investments.

guitarman001

What's the difference between self-insuring and getting buildings insurance? Sounds like you're insured in both cases.

chucknorris

guitarman001 wrote: »

What's the difference between self-insuring and getting buildings insurance? Sounds like you're insured in both cases.

Self insuring means I don't have insurance, if my house burns down I build another, paid from my capital. I think most would agree that that is completely different to taking out buildings insurance.