Landlords: what's your NET rental yield?

guitarman001

Oh right!! So basically you "insure yourself" - not through any scheme or anything. You just set aside the capital amount instead of paying some fee to an insurance company. Thanks!

chucknorris

guitarman001 wrote: »

Oh right!! So basically you "insure yourself" - not through any scheme or anything. You just set aside the capital amount instead of paying some fee to an insurance company. Thanks!

Yes that's it. But not exactly 'set aside', I would have to sell shares if I wanted to rebuild my house, I am happy with my money in shares as part of my portfolio (rather than specifically being designated to pay for a house rebuild).

guitarman001

So many people I know are getting into this property game.
I still think prices are high but rather than ignore it, I want to actually find out some more now - maybe I'm missing some big opportunity.

chucknorris

guitarman001 wrote: »

So many people I know are getting into this property game.
I still think prices are high but rather than ignore it, I want to actually find out some more now - maybe I'm missing some big opportunity.

The biggest mistake that I see people make, is to judge the whole thing on the initial (year one) yield, the advantage of property (and of course this also applies to shares) is that the yield grows, when I previously (I am no longer interested in property) looked at property I tended to look at what it would be doing 10 years later. Obviously I also looked at the initial yield too, after all you have to successfully get through those 10 years.


I've seen it posted many times, how the (initial) yield doesn't look that good, of course it doesn't, property is a long term investment.

Pincher

Cash flow is king. Assuming you are in for the long term, an investment that requires constant injection of money is doomed. You need to have positive cash flow, which means net yield. I knew this very intelligent person, first class honours degree and more. Had a sponsored degree, with a guaranteed job at the end of it at a good salary. Borrowed the deposit from his dad, mortgaged to the Max in the late 1980s, a few weeks before the crash. Mired in negative equity for the next ten years. His very good salary barely paid the mortgage, especially when interest rate went up to 13%.

Ideally, you want an interest only fixed rate Buy to Let mortgage, and get tax relief on the rental income. This minimises the capital invested, minimise the cost, which push up the yield.

Bettie

chucknorris wrote: »

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.

It's not just about rebuild though,
what about Public Liability/Personal Liability to tenants and visitors.

Pincher

Self insurance is great if you have a 100 properties, but why would the lender allow you to do it?

Amusingly, the Ministry of Defense is self-insured. So if you have an accident with a private on official business, you have to claim against the MOD. The Taliban blew up my armoured personnel transport, fully comp with Admiral?

chucknorris

Bettie wrote: »

It's not just about rebuild though,
what about Public Liability/Personal Liability to tenants and visitors.

There are no tenants in my home (my investment properties are insured). The only real public liability which concerns me enough to seek insurance, was for my dog, so I joined the Dog's Trust which covers my dog for public liability insurance.


EDIT: He's a friendly Labrador, it isn't about him biting someone, but he could possibly do something like run onto the road and cause an accident.

chucknorris

Pincher wrote: »

Self insurance is great if you have a 100 properties, but why would the lender allow you to do it?

As I said above our investment properties are insured (because of the greater risk), even though some of them are mortgage free (so there is no requirement to be insured, we just prefer them to be).

Bettie

chucknorris wrote: »

There are no tenants in my home (my investment properties are insured). The only real public liability which concerns me enough to seek insurance, was for my dog, so I joined the Dog's Trust which covers my dog for public liability insurance.

I have to say my home insurance at less than £100 a year buildings and contents was the best money I have ever spent - after a robbery and the destruction of my property I was fully compensated, the damage alone was thousands. My landlords insurance is rather more expensive and buildings only but I can sleep safe knowing that any visitor having an accident on any of my properties will be covered.