BTL Returns

Generali

chucknorris wrote: »

Using my properties, basing the yield on what they would cost to buy, and the achievable rent, mine vary between 3.4% and 4.5%. I'm not claiming that is typical, but it is about what I would expect.

3.5% seems to be normal but I am sure that 20% higher is available on an exceptional basis.

The only area that came close to 4.5% I found was New Malden which isn't really London.

chucknorris

Generali wrote: »

3.5% seems to be normal but I am sure that 20% higher is available on an exceptional basis.

The only area that came close to 4.5% I found was New Malden which isn't really London.

The 4.5% is based on my best performing property which is a 3 bed ex-local authority flat, it is good quality (in the past I have lived in it myself for over 5 years) but nevertheless because it is ex-LA, there is a dampening of the value, which increases the yield. Currently I only get £1,800/month rent, but I think £1,900 is easily achievable (which is what I used), if I wanted to go for broke I could actually try for £2,200/month (but that would be really sweating the property). It is worth about £500k, but it might be slightly more, I don't tend to value them very often (so occasionally I am slightly out of touch with the market value).

cells

None of mine are 3.5% yield if I could get that I would probably sell up.

My worse yield based on current prices is 4.4% and I only bought that last month and it offers development potential which is why I accepted a lower yield on that than I normally would go for

However hackney has gone very crazy over the last 3 months with some properties up 10%-15% in just 3 months so maybe yields are about to crash there. If I could get prices that mean 4% yield I would be very tempted to sell half. at 3.5% I would be very tempted to sell all......but then again what would I buy in its place?

mwpt

Chuck, or other landlords. If mortgage finance was not an option to you but you were cash rich, could you tell me what your gross yield would have to be on a property to invest in buy to let (as opposed to borrow to let)?

I'm trying to work out what the rough price of a property would be, given the rent. For example, a two bedroom flat renting for £1500 pm. Could you walk me through the figures?

My thumb suck calculations are:

£1500 x 11.5 months (leave 1 month void every two years as safety net) = gross rent pa = £17250.
Maintenance costs? £1200?
Agents fees? 5%? = £75 pm x 12 = £900 pa
Insurance etc (I don't know, ignoring)

So net profit from rent = £15150

My guess is people would want a net yield of 5% or greater?

Asset value = £15150 / 0.05 = £303000

Do you value things differently? Do you forecast and include future rent rises and capital gains into the present asset value and therefore value it higher?

michaels

Agents tend to charge 9% find only or 15% managed.

Generali

michaels wrote: »

Agents tend to charge 9% find only or 15% managed.

I'm quoting rent ÷ price before tax.

I suppose I should include SDLT at the very least in the purchase price.

cells

michaels wrote: »

Agents tend to charge 9% find only or 15% managed.

That is far too high

I pay 2 weeks for find only which equals 3.85% if the tenants stay only 1 year. If they stay 2 years it works out to 1.9% and if they stay 3 years 1.3%

On average I would say it works out to less than 2%

HappyMJ

mwpt wrote: »

Chuck, or other landlords. If mortgage finance was not an option to you but you were cash rich, could you tell me what your gross yield would have to be on a property to invest in buy to let (as opposed to borrow to let)?

I'm trying to work out what the rough price of a property would be, given the rent. For example, a two bedroom flat renting for £1500 pm. Could you walk me through the figures?

My thumb suck calculations are:

£1500 x 11.5 months (leave 1 month void every two years as safety net) = gross rent pa = £17250.
Maintenance costs? £1200?
Agents fees? 5%? = £75 pm x 12 = £900 pa
Insurance etc (I don't know, ignoring)

So net profit from rent = £15150

My guess is people would want a net yield of 5% or greater?

Asset value = £15150 / 0.05 = £303000

Do you value things differently? Do you forecast and include future rent rises and capital gains into the present asset value and therefore value it higher?

Maintenance costs on a £300,000 property will be more than £1,200/year.

Agency costs are higher than 5%. I pay 50% of first months rent as tenant finder fee plus 8%+VAT ongoing management fee. On £1,500 of rent that would be £2,000/year. That's supposed to be cheap.

Other agents charge 15% + VAT of each months rent but usually include EPC, gas safety certificate and include free rent protection insurance which you can buy separately. They also usually inspect property every 6 month for no extra charge.

cells

mwpt wrote: »

Chuck, or other landlords. If mortgage finance was not an option to you but you were cash rich, could you tell me what your gross yield would have to be on a property to invest in buy to let (as opposed to borrow to let)?

I'm trying to work out what the rough price of a property would be, given the rent. For example, a two bedroom flat renting for £1500 pm. Could you walk me through the figures?

My thumb suck calculations are:

£1500 x 11.5 months (leave 1 month void every two years as safety net) = gross rent pa = £17250.
Maintenance costs? £1200?
Agents fees? 5%? = £75 pm x 12 = £900 pa
Insurance etc (I don't know, ignoring)

So net profit from rent = £15150

My guess is people would want a net yield of 5% or greater?

Asset value = £15150 / 0.05 = £303000

Do you value things differently? Do you forecast and include future rent rises and capital gains into the present asset value and therefore value it higher?

I want a net yield from my savings account of 10% does not mean I will get what I want

A cash purchase can accept a much lower yield than a debt purchase as a debt purchase has higher costs and needs to manage cash flow and most investors can not sustain negative cash flow for a long period.

The typical mortgage restrictions are 125% rental cover at 5.5% pay rate. That means with a 25% down mortgage you can not bid lower than 5.15% gross yield the bank simply says no if the bid is below 5.15%

antrobus

Generali wrote: »

3.5% seems to be normal but I am sure that 20% higher is available on an exceptional basis.

The only area that came close to 4.5% I found was New Malden which isn't really London.

According to LendInvest the average rental yield in the UK is 4.56%. Calculated using property sale and rental prices extracted from Zoopla for the time period 1/1/2015 to 13/10/2015, apparently.

The area with the highest yield of 5.9% was .......

.... Aberdeen.