would anyone still buy btl at 7-7.5% yield?

tucbiscuit

Hi, just wondering if anyone ould still buy a btl property if they could achieve a yield of 7-7.5% from the rental?

Should I be thinking just of rental yield or should I be thinking of capital growth as well?


thanks

clutton_2

"" Should I be thinking just of rental yield or should I be thinking of capital growth as well?"

yes - think of both

silvercar

Is that figure total costs or just rental yield?

Have you allowed for voids?

beingjdc

7 - 7.5% is very good! My landlord is getting 4.7% gross, before accounting for voids, repairs, agency fees, etc.

Generali

Is that what you can get by renting the place out or is it a guarantee from the seller?

tucbiscuit

Generali wrote: »

Is that what you can get by renting the place out or is it a guarantee from the seller?

what I can get, 500 quid a month on an 80,000 buy

Gorgeous_George

More likely to be around 6.5% after costs and voids.

It's not Life Tasted Sweet's by any chance :rotfl:

GG

Generali

As other people have alluded to, work out the money on a cashflow basis. What are your costs, what is your income likely to be? What happens worst case (tenant stops paying rent and you have to evict through the courts/tenant smashes up the place/interest rates rise considerably)? Yield is pretty meaningless IMO. Cashflow is all. It's not much solace knowing that you could be making £xxx pm if you're actually making -£xxx.

silvercar

If you think the property is a good bet in its own right then the deal should stand up.

tucbiscuit

Gorgeous_George wrote: »

More likely to be around 6.5% after costs and voids.

It's not Life Tasted Sweet's by any chance :rotfl:

GG

yeah there's hidden costs I know


and not sure what you're talking about with the life tastes sweet thing, so presume it's a no

macaque_2

tucbiscuit wrote: »

Hi, just wondering if anyone ould still buy a btl property if they could achieve a yield of 7-7.5% from the rental?

Should I be thinking just of rental yield or should I be thinking of capital growth as well?

thanks

If I was interested in BTL (which I am not), I would certainly consider buying at 7 - 7.5% providing:

(1) The income was genuine and not subsidised or underwritten by a builder.
(2) The income was sustainable (and was not relying on a lucky deal with a tenant paying too much).
(3) The 7 - 7.5% yield was a net value after taking account of running costs and capital repairs.
(4) The 7 - 7.5% yield was based on the price I was paying (and not the amount I was borrowing)
(5) There were no problems with the property that would affect future revenues.

Finally, I would want to be sure that the borrowing costs did not exceed the net income. In a rising housing market, one can get away with borrowing costs exceeding income. In a flat or falling market, income should match borrowing costs. For this reason my buying thresholds would be as follows:

(1) Rental income of over 8.5% : buy with a mortgage or cash
(2) Rental income of 7- 8.5% : buy with cash (or high proportion of cash)
(3) Rental income of less than 7% : I would not buy under any circumstances.