10% yield on a BTL

westernpromise

This is on Rightmove:
http://www.rightmove.co.uk/property-for-sale/property-73505510.html

Including penalty stamp duty that would cost £41.2k to buy. It's tenanted and letting at £5,700 a year.

So let's say you're an absentee landlord and you bought this place without ever leaving London. You'd pay 15% of the rent for letting and management and let's say you spend another £500 a year on maintenance.

That's still north of a 10% return. Where else can you put £40k out so it earns over 10% a year?

spadoosh

That place isnt selling for £40k.

Itll be £60k+

It was sold in 2007 for £54k.

Next door sold in 2011 for £85k.

You can get £40k houses in burnely but they wont look that nice. And therefore wont return that amount of rent.


Hehe, have a look at the auction valuer, might explain the low estimate.

Graham_Devon

It's an auction guide price. I.e. starting price. Done to lure people in, and it seems to have worked in your case.

It's not the price.

GreatApe

Costs are higher in cheap areas relative to rents the work load is also higher relative to rents.

Personally I would go for 10 x £500k properties in London than 50 x £100k properties up north.
You have 5 x the workload up north plus costs are higher for maintenance and upkeep and general replacement of white goods etc for 50 properties rather than 10

bxboards

westernpromise wrote: »

That's still north of a 10% return. Where else can you put £40k out so it earns over 10% a year?

10% is very unambitious for buy to let.

Although I've seen a few places say 6.5% is 'average' this average is skewed by high prices vs. low yields in many areas.

Zero_Sum

Ive got mate whose house is up for £39k so no stamp duty. You'd get about £400pcm which is over 12%.

Its disappeared from rightmove, so mustve sold.

Cakeguts

GreatApe wrote: »

Costs are higher in cheap areas relative to rents the work load is also higher relative to rents.

Personally I would go for 10 x £500k properties in London than 50 x £100k properties up north.
You have 5 x the workload up north plus costs are higher for maintenance and upkeep and general replacement of white goods etc for 50 properties rather than 10

Maintenance costs up north are less than in London. They are in line with house prices and people's earnings. The big advantage is that if you don't have to sell them all in the same year you can gain from having smaller amounts of capital gains tax to pay.

justme111

I am sure others who have btl experience will correct me if I am wrong-
you did not seem to account for:
-tax
- voids. what is the average time a tenant stays in the property ?
- redecoration . £500 you mentioned my be enough for current repairs but not sure about ones between tenants
- legislative charges - ll those compliance certificates need renewals
bad tenants not paying rent

steampowered

Where else can you get 10% a year?

The stock market would be the obvious answer.

The S&P 500 has returned on average 7% a year between 1950 and 2009, after adjusting for inflation.

I suppose with inflation that gets you to about 10% p.a. gross.

Gwendo40

For someone with so many posts and such forthright opinions on all things property related the OP appears to be remarkably naive as to how the auction process works, in particular with regards to guide prices.

kinger101

ruhe wrote: »

Yes that's true but with stocks and shares you can't leverage by using these as an asset class in which to borrow against and there's no capital appreciation either, mainly though there's no security stocks and shares can go up and down in a way that property rarely does.

Property can't be stolen and you can't be swindled in the same way that people can be tricked into buying fraudulent stocks and shares such as Enron, the Lloyds names debacle etc not to mention the many pension funds that lost money due to investing in complex misunderstood products such as derivatives in the recent banking crisis of 2007

There are leveraged ETFs available.

Most indices have had a decade of year on year increases.

You don't have to buy a single stock with £50K. In fact, the risk is intrinsically higher if you have £50K to put into BTL compared to stocks and shares. A FTSE 250 tracker has 250 companies. They won't all go bust. One bad tenant.....

I don't know where you get the idea there's no capital appreciation, but perhaps you have not been fortunate enough to invest in the likes of Malborough Special Situations, AXA Framlington Global Technology or Old Mutual UK Smaller Companies.