Landlords:What is your minimum yield?

M0ney

Hi,

Just a curious question, I currently have a property which I let out and all being well I may like to acquire more in the future to let out....

When you're looking to buy to let a property, what do you consider to be the minimum yield which you would consider? Please feel free to expand on your reasons to help out a novice Landlord.

Thanks.

moneyistooshorttomention

Now I've lost track of the article I read about what landlords consider a reasonable yield - after carefully reading it and working out what the yield would be on my last house if I accepted either of the two offers I had received from landlords.;)

That was quite a useful article too - as it told me that even the lower offer out of the 2 who made offers would result in them not making a "reasonable yield" from my place if they stuck to the price they had offered me. Conclusion = my EA was right and they would be likely to try and gazunder me at some point, as they would have to pay me noticeably less than their offers to make a "reasonable yield" from my house.

So - I sold it to someone who wanted it for their starter home.

M0ney

Thanks for that, I'm not quite sure where you were going with that. Just wondered at what percentage people would need to consider a BTL viable.

bigfreddiel

It would have to be more than I could earn with a diversified, balanced portfolio, and then some to factor in the risk, and expenses.

So I would need 10% minimum, before even looking into it.

fj

Owain_Moneysaver

It's not a simple single figure.

Cheaper properties outside the south-east can offer higher gross rental yields (sometimes above 10%) but will have lower capital gain over time.

Eg Sheffield S1 may give you 11.5% but Knightsbridge SW7 only 1.7%. However if you can afford to buy now in Knightsbridge you will probably get a much higher capital growth.

Talc1234

Owain_Moneysaver wrote: »

It's not a simple single figure.

Cheaper properties outside the south-east can offer higher gross rental yields (sometimes above 10%) but will have lower capital gain over time.

Eg Sheffield S1 may give you 11.5% but Knightsbridge SW7 only 1.7%. However if you can afford to buy now in Knightsbridge you will probably get a much higher capital growth.

Assuming that prices continue to rise. Assuming that future price rises are faster in Knightsbridge than Sheffield. Assuming that foreign buyers don't get tired of propping up the London prime market. One house in Knightsbridge buys 20 in Sheffield.

silvercar

Talc1234 wrote: »

Assuming that prices continue to rise. Assuming that future price rises are faster in Knightsbridge than Sheffield. Assuming that foreign buyers don't get tired of propping up the London prime market. One house in Knightsbridge buys 20 in Sheffield.

All reasonable assumptions, yes they carry a risk, but I can't see foreign investors getting excited about S1.

Dird

Owain_Moneysaver wrote: »

Eg Sheffield S1 may give you 11.5% but Knightsbridge SW7 only 1.7%.

MK & York are so weird -_-" surely there's somewhere else outside London people could live that would make the rent in MK drop.

HappyMJ

M0ney wrote: »

Hi,

Just a curious question, I currently have a property which I let out and all being well I may like to acquire more in the future to let out....

When you're looking to buy to let a property, what do you consider to be the minimum yield which you would consider? Please feel free to expand on your reasons to help out a novice Landlord.

Thanks.

Lower value smaller properties tend to also have a higher gross yield and larger properties with multiple bedrooms will have a lower gross yield.

I would aim for around the 5% mark. You won't make much on an annual basis but over time you should get a good capital gain.

But....that figure is based in the area in which I live. Different areas and property types give vastly different yields.

ratechaser

I've been keeping an eye on properties in my area over the past year that have come up for sale with existing tenants. They tend to be 1-2 bed flats in the 150-300k range, and it's a pretty consistent 4-5% gross yield. Not something that would tempt me to dip my toe into BTL right now!

ognum

I agree with what has been said about years and capital growth. Both need to be considered as sows a balance portfolio of pension, stock market, is a and cash.

It's not an easy one to answer.

However, what I would not consider is a property in an area without capital growth at below 7% return.

I don't own anything of that type but that's because I am not looking for it. I do have some rules and that is I won't buy anything in areas I don't know well and I don't buy anything that if needed I or one of my family would not live in that is my standard.

The inevitable result is that my return is around 5% and the properties I own (all outright) all have good capital growth.