Property rental or investment

flopsy1973

Thrugelmir wrote: »

Would you become a higher rate taxpayer?

No t a higher rate tax payer

flopsy1973

Any further advice on this as I have to contact agent this week

Thrugelmir

Gross income of £7.2k doesn't seem particularly high on £180k of equity.

What's the net return likely to be after all costs and tax are deducted?

Audaxer

Thrugelmir wrote: »

Gross income of £7.2k doesn't seem particularly high on £180k of equity.

What's the net return likely to be after all costs and tax are deducted?

Yes, it would be interesting to know what the net income would be after costs are deducted. On a medium risk investment portfolio of £180k you could probably safely withdraw 3% per annum increasing with inflation, if you want to retain and hopefully grow the capital value. That would be £5,400 per year increasing with inflation. I think you would want the net rental income to be a good bit more than that to make owning and renting out the property a better option over the long term.

Thrugelmir

Audaxer wrote: »

On a medium risk investment portfolio of £180k you could probably safely withdraw 3% per annum increasing with inflation, if you want to retain and hopefully grow the capital value. That would be £5,400 per year increasing with inflation.

If only it were that easy to project for a given period of time.

Likewise with property void periods and longer term maintenance/replacement costs need to be factored into ones thinking. Rather than just current yield. Property is a business not just an investment.

Sailtheworld

4% gross return and all semblance of diversification blown out of the water. Surely that's got to be seen as a poor reward for the increased risk and hassle.

OP your brother's got the best idea. I'd sell up and walk away too.

flopsy1973

I reckon on about 5200 net allowed 700 for costs as I will manage and do maintenance. Does that sound right?
It does not sound a lot of income when you see it like that so what is the verdict?
Is it worth buying my brothers share out?

AnotherJoe

Sailtheworld wrote: »

4% gross return and all semblance of diversification blown out of the water. Surely that's got to be seen as a poor reward for the increased risk and hassle.
^^^^^^^ this
OP your brother's got the best idea. I'd sell up and walk away too.

^^^^ and that

One other thing, if at some later date you decide you want a % of your inheritance for whatever reason, you can sell some of the shares/funds/etc.
Much more difficult to do that with a property except by taking out a new mortgage on it and then you are paying to release it. And its not a quick process.

Also, funds and shares will never phone you up at 3am saying the boilers broken,or there's a leak and waters coming through the ceiling, etc.

bostonerimus

I bought a rental flat for $110k back in 1997 and the rent was $1200/month so $14.4k/year. After taxes and expenses I end up with $7k, so that's a 6% return, Today the property is worth $330k and the rent is $20k/year and last year I ended up with $15k after all expenses so that's 4.5% return on the value of the property. The annual compounded growth of my capital has been about 5%.

So capital growth of 5% with between 4.5% and 6% "dividend" has been a nice return. Run the numbers before you buy a rental, I'd want at least 4% income after all expenses and then hope for some capital gain over a period of at least 10 years.

Thrugelmir

flopsy1973 wrote: »

I reckon on about 5200 net allowed 700 for costs as I will manage and do maintenance. Does that sound right?

Depends on how long you intend retaining the property for, and it's current condition. As with cars as they age, property throws up all sorts of ownership issues.