BTL Yield

danm

i am looking at buying a BTL property with 75% financing.

Gross yield is just above 5%. Net yield is half that....

does it seem right that costs are such a huge proportion of income.... i am fairly certain of my workings, i have included some assumptions for void periods also.... i guess i was just surprised at the impact.

Victor_the_Gink

So you only have a 25% deposit, and the yield is appalling compared to other investments. Is this not just a huge gamble on house prices?

theartfullodger

And if you get an unexpected bill (I've a £7k+ heating system replacement this summer) or get the tenant-from-hell (or agent-from....) who doesn't pay for 7 months,what then?

dimbo61

Are you a higher rate tax payer ?
Earn over £45,000 a year or close too it !
Your income and your rent from letting out a property will soon be added together to work out your tax rate.
IE basic 20% tax payer or 40% higher rate tax payer.

Miss_Samantha

Victor_the_Gink wrote: »

So you only have a 25% deposit, and the yield is appalling compared to other investments.

The yield mentioned is based (hopefully) on the value of the property.

The gross yield on the capital invested is therefore 20%, which is the value to use when comparing to other investments.

Thrugelmir

Miss_Samantha wrote: »

The gross yield on the capital invested is therefore 20%, which is the value to use when comparing to other investments.

With simplistic logic like that. BTL wins hands down. Not surprising that some people never find that pot of gold.

danm

Thanks for responses guys.
Will be owning in wife's name (non taxpayer) as would not make sense in my own.

Last few comments are correct... The gross yield of 5% is on total property value. Contrary to the initial response, this is not a gamble on house prices. If I look solely at what I am investing, the NET income yield is just north of 7% - FTSE is delivering a current income yield of ~ 3.75% and I am already exposed to shares....

ognum

danm wrote: »

Thanks for responses guys.
Will be owning in wife's name (non taxpayer) as would not make sense in my own.

Last few comments are correct... The gross yield of 5% is on total property value. Contrary to the initial response, this is not a gamble on house prices. If I look solely at what I am investing, the NET income yield is just north of 7% - FTSE is delivering a current income yield of ~ 3.75% and I am already exposed to shares....

How can she get a mortgage then?

getmore4less

typical professional landlord target gross yields would be closer to 10%.

low interest rates and gearing make the gross return on investment look much better.

one issue to watch is the costs, you are still responsible of 100% of those even with a 25% investment.

thats where 10% on 100% gives far better cashflow than 5% on 25% and 1%-2% after debt interest on the other 75%

danm

ognum wrote: »

How can she get a mortgage then?

To be clear. Joint mortgage but owned as tenants in common (wife 99%)

danm

getmore4less wrote: »

typical professional landlord target gross yields would be closer to 10%.

.....

one issue to watch is the costs, you are still responsible of 100% of those even with a 25% investment.

thanks...

all my numbers include costs, a stress for rental voids and some maintenance.

can't see anywhere inside the M25 giving a 10% gross yield!.