Bruce Banner Posted September 5, 2010 Share Posted September 5, 2010 I hadn't looked at Rightmove for weeks, but this afternoon, I took a look at the price of houses (I hate the word property) in my area and was frankly amazed. A few months ago, houses similar to the one I'm renting were listed for about £400K. Now they are down 10% or more. One house, identical to "ours" has been reduced three times and is now listed at £350K which is a 12.5% reduction. A quick fag packet calculation shows that my landlord's yield has just increased by about 15%, I wonder if he's happy about that . Quote Link to comment Share on other sites More sharing options...
righttoleech Posted September 5, 2010 Share Posted September 5, 2010 I hadn't looked at Rightmove for weeks, but this afternoon, I took a look at the price of houses (I hate the word property) in my area and was frankly amazed. A few months ago, houses similar to the one I'm renting were listed for about £400K. Now they are down 10% or more. One house, identical to "ours" has been reduced three times and is now listed at £350K which is a 12.5% reduction. A quick fag packet calculation shows that my landlord's yield has just increased by about 15%, I wonder if he's happy about that . This is excellent news Bruce. However your landlords yield would be based on what he paid for the .....er house. He will no doubt chant the mantra....'I am in it for the long term', so his capital loss.....(or the decline in his capital gain), will only be crystalised if he sells. Quote Link to comment Share on other sites More sharing options...
dolce vita Posted September 5, 2010 Share Posted September 5, 2010 This is excellent news Bruce. However your landlords yield would be based on what he paid for the .....er house. He will no doubt chant the mantra....'I am in it for the long term', so his capital loss.....(or the decline in his capital gain), will only be crystalised if he sells. The yield is calculated on the current value, not what the house was bought for. Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted September 5, 2010 Author Share Posted September 5, 2010 This is excellent news Bruce. However your landlords yield would be based on what he paid for the .....er house. He will no doubt chant the mantra....'I am in it for the long term', so his capital loss.....(or the decline in his capital gain), will only be crystalised if he sells. In that case his yield is well over 20% as he's had the house for years . Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted September 5, 2010 Author Share Posted September 5, 2010 (edited) The yield is calculated on the current value, not what the house was bought for. Edit: His current yield is just over 3%, about a percent less than I'm getting from NS&I . Edited September 5, 2010 by Bruce Banner Quote Link to comment Share on other sites More sharing options...
SarahBell Posted September 5, 2010 Share Posted September 5, 2010 The yield is calculated on the current value, not what the house was bought for. And you don't think it's that sort of insanity that helped get us into the mess. By all means crystalise your capital gains by selling at that but don't claim your yield is based on current value. Quote Link to comment Share on other sites More sharing options...
dolce vita Posted September 5, 2010 Share Posted September 5, 2010 And you don't think it's that sort of insanity that helped get us into the mess. By all means crystalise your capital gains by selling at that but don't claim your yield is based on current value. Are you suggesting that if I didn't pay anything for a house (inheritance for example) and rented it out my yield would be infinite? Yield has to be calculated on current value in order to compare the opportunity costs with other investments. Quote Link to comment Share on other sites More sharing options...
(Blizzard) Posted September 5, 2010 Share Posted September 5, 2010 (edited) The yield is calculated on the current value, not what the house was bought for. There is no fixed definition of yield. He may want to consider either number, but it doesn't change the fact that he lost money when the house value fell. EDIT: And of course, he should probably include future falls in his estimated yield. Edited September 5, 2010 by (Blizzard) Quote Link to comment Share on other sites More sharing options...
SarahBell Posted September 5, 2010 Share Posted September 5, 2010 Are you suggesting that if I didn't pay anything for a house (inheritance for example) and rented it out my yield would be infinite? Yield has to be calculated on current value in order to compare the opportunity costs with other investments. Well it'd be free money so in that sense maybe but it's a nonsense to do it by valueing the house. How often would you do it? I can see if you are looking to sell and want to present it as a business proposal you might show yield - but the yield for a buyer is not the same as the yield for the existing owner if they paid less X years ago. I think it's stupid to even bother calculating it. Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted September 5, 2010 Share Posted September 5, 2010 Are you suggesting that if I didn't pay anything for a house (inheritance for example) and rented it out my yield would be infinite? Yield has to be calculated on current value in order to compare the opportunity costs with other investments. If you say so. if you inherited, you would have say £200K to invest. It didnt cost you anything, so any profits are yours to keep. If the asset suddenly doubles, then you donthave £400K to invest...you have to sell it, stop whatever income you are receiving and reinvest. In the case of property, and BTL, then what would be the point...the rent you receive is the rent you receive...whatever 3rd parties might have to pay to get into your shoes. this mans personal yeild is that he has invested v his profits. anything else is fantasy. Although banker would pay himself a bonus on the capital increase as "profits". In no other business is stock on the shelf unsold still profit. Quote Link to comment Share on other sites More sharing options...
fellow Posted September 5, 2010 Share Posted September 5, 2010 (edited) I hadn't looked at Rightmove for weeks, but this afternoon, I took a look at the price of houses (I hate the word property) in my area and was frankly amazed. A few months ago, houses similar to the one I'm renting were listed for about £400K. Now they are down 10% or more. One house, identical to "ours" has been reduced three times and is now listed at £350K which is a 12.5% reduction. A quick fag packet calculation shows that my landlord's yield has just increased by about 15%, I wonder if he's happy about that . So he earns more from your house because similar house's have have dropped their asking price and devalued the property? Edited September 5, 2010 by fellow Quote Link to comment Share on other sites More sharing options...
winkie Posted September 5, 2010 Share Posted September 5, 2010 I hadn't looked at Rightmove for weeks, but this afternoon, I took a look at the price of houses (I hate the word property) in my area and was frankly amazed. A few months ago, houses similar to the one I'm renting were listed for about £400K. Now they are down 10% or more. One house, identical to "ours" has been reduced three times and is now listed at £350K which is a 12.5% reduction. A quick fag packet calculation shows that my landlord's yield has just increased by about 15%, I wonder if he's happy about that . I think you need to look at getting your rent reduced. Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted September 5, 2010 Share Posted September 5, 2010 Well it'd be free money so in that sense maybe but it's a nonsense to do it by valueing the house. How often would you do it? I can see if you are looking to sell and want to present it as a business proposal you might show yield - but the yield for a buyer is not the same as the yield for the existing owner if they paid less X years ago. I think it's stupid to even bother calculating it. both ways are a way of calculating a result. For me, basing prices on rents acheived is silly....both are moving targets and any calculation you do will only provide a guide. Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted September 5, 2010 Author Share Posted September 5, 2010 Well it'd be free money so in that sense maybe but it's a nonsense to do it by valueing the house. How often would you do it? I can see if you are looking to sell and want to present it as a business proposal you might show yield - but the yield for a buyer is not the same as the yield for the existing owner if they paid less X years ago. I think it's stupid to even bother calculating it. To my mind the only sensible way of calculating yield is against current market value. That way a landlord can decide if it's better to rent out the house or sell it and bank the money. For instance, if I drew £350K out of the bank and bought the house I'm renting, I'd lose £13,650pa interest, but my rent is only £11,000, so even if you forget about maintenance and falling house prices I'm still better off renting . Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted September 5, 2010 Author Share Posted September 5, 2010 So he earns more from your house because similar house's have have dropped their asking price and devalued the property? No, he gets the same money in rent, but his yield (as a percentage) has increased. Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted September 5, 2010 Share Posted September 5, 2010 To my mind the only sensible way of calculating yield is against current market value. That way a landlord can decide if it's better to rent out the house or sell it and bank the money. For instance, if I drew £350K out of the bank and bought the house I'm renting, I'd lose £13,650pa interest, but my rent is only £11,000, so even if you forget about maintenance and falling house prices I'm still better off renting . AND, if the Landlord only had £200K skin in the game and no loan, then He'd be better off keeping the rent as it is. His £200K is realising £11,000. Not that he can turf you out anyway. If he has a loan, though, then the LTV starts to make a big difference to the calculation. Quote Link to comment Share on other sites More sharing options...
fellow Posted September 5, 2010 Share Posted September 5, 2010 To my mind the only sensible way of calculating yield is against current market value. That way a landlord can decide if it's better to rent out the house or sell it and bank the money. For instance, if I drew £350K out of the bank and bought the house I'm renting, I'd lose £13,650pa interest, but my rent is only £11,000, so even if you forget about maintenance and falling house prices I'm still better off renting . But he already owns the house, so his yield has gone down. Quote Link to comment Share on other sites More sharing options...
fellow Posted September 5, 2010 Share Posted September 5, 2010 No, he gets the same money in rent, but his yield (as a percentage) has increased. No it hasn't Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted September 5, 2010 Author Share Posted September 5, 2010 AND, if the Landlord only had £200K skin in the game and no loan, then He'd be better off keeping the rent as it is. His £200K is realising £11,000. Not that he can turf you out anyway. If he has a loan, though, then the LTV starts to make a big difference to the calculation. But he could sell the house for £350K and get over £13K interest with no maintenance costs instead of a poxy £11k rent . Quote Link to comment Share on other sites More sharing options...
(Blizzard) Posted September 5, 2010 Share Posted September 5, 2010 But he already owns the house, so his yield has gone down. Look it's very simple. The yield you calculate depends upon what you want to use if for. If you want to be direct and brutal, you should inform your landlord that his yield has fallen based upon his initial investment. If you want to be more sarcastic and irritating, you should tell him his yield has increased based upon its new value. This really is textbook stuff. Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted September 5, 2010 Author Share Posted September 5, 2010 (edited) But he already owns the house, so his yield has gone down. No it hasn't Eh? Edited September 5, 2010 by Bruce Banner Quote Link to comment Share on other sites More sharing options...
fellow Posted September 5, 2010 Share Posted September 5, 2010 (edited) Eh? If he paid 400k for a house which is now worth 350k, he still paid 400k for it and still owes the same on his mortgage. But he has now LOST 50k capital Edited September 5, 2010 by fellow Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted September 5, 2010 Share Posted September 5, 2010 But he could sell the house for £350K and get over £13K interest with no maintenance costs instead of a poxy £11k rent . Accepted...Except he can't..you are there! My LL owns my place bought for £400K 5 years ago. he's getting 2.7% based on that valuation...that is all the money he has committed. current value with all the work needing I would guess at £300K. so using the current value method, his yield has gone up. But of course, he has actually LOST about 100K. Im not saying either way is wrong, but everything in this yield calc is based on moving targets. It can only be a guide, in my view. Quote Link to comment Share on other sites More sharing options...
Bruce Banner Posted September 5, 2010 Author Share Posted September 5, 2010 Accepted...Except he can't..you are there! My LL owns my place bought for £400K 5 years ago. he's getting 2.7% based on that valuation...that is all the money he has committed. current value with all the work needing I would guess at £300K. so using the current value method, his yield has gone up. But of course, he has actually LOST about 100K. Im not saying either way is wrong, but everything in this yield calc is based on moving targets. It can only be a guide, in my view. It sounds like we have very similar rental deals. Good isn't it . Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted September 5, 2010 Share Posted September 5, 2010 It sounds like we have very similar rental deals. Good isn't it . new double glazing arriving soon! Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.