Average Rental Yield 6.4%

[Cinzano Bianco]

Yes all investment mortgages are I/O on 104% finance.

I suppose as long as your tenants keep up their payments you are ok with what you have... But what happens if you get hit with lending restrictions - do you just stop investing?

How would a something like a margin call (if this exists for mortgages) affect you if the market starting falling because of the above?

[ScaredEitherWay]

I've been eyeing up a lovely flat, it's a studio and there's one for sale at £185k, or this one to rent at £550/month. The one for sale is very dated, the one for rent is smart enough but not all blinged up.

So I got to wondering how low I could offer for the rental, I noticed it'd already dropped from £575/month and I can't really afford the £550, but I see it as an opportunity to live somewhere gorgeous for a year or so, that would be impractical to actually own due to remoteness.

The service charge is £160/month, the agent fees are 10%/month. So I figured the LL would be forking out £160+£55/month, or £215/month - meaning the actual rent part in his hand (before any other consideration) is £335/month - so that's 2.1%

I also spotted another one about 5 miles up the road, lovely views which caught my eye. That one's got 2 beds and is up for sale and rent. £100k or £550/month, with 10% agent fees and £1000/year service charge, so the yield on that one's 4.98%.

[Meat Puppet]

Yes I am aligned with you here.

Having done the house trading bit in the past I now realise it is best to borrow and hold for ever. When you do the projections its quite mind boggling how much growth and income you get out of them in the future. Switch to reverse mortgages in retirement live well and the kids get what is left when i cark it.

Hey Bardon. I would never do what you are up to (its the lack of diversification that worries me the most), but I am interested in the investments you have in the US which seem to be taking advantage of the repo market. Do you know of any big players that are involved in this?

What I'd like to see is a REIT that specialised in buying up repo'd properties, fixing them up, and renting them out. I wouldn't mind putting a few percent of my assets in an enterprise like this.

[Secret Squirrel]

That’s the way it works the more expensive the house and the better the area the lower the yield and the more you get for your rent.

Definitely , I can see why so many are more than happy to rent a nicer place than they'd probably buy , if they have a huge savings pot

It's really the lower end tenants that probably can't afford to buy that get the harsh end of the stick , and why most people at the bottom of the ladder opt to buy if possible

I can't quite see why the landlords are happy to rent all these expensive gaffs out so cheap but i guess they've made their capital gains too .

[Kyoto]

Simple point that you have missed completely. Yield is Gross Rent divided by current Market Value.

Any other figure you produce may be relevant to assessing the viability of a rental but it isn't Yield.

So Yeild is still 6%. Net Prifit will be considerably less.

In just the same way that, for a trading company, turnover is NOT the same as profit.

Simples

There's lots of definitions of yield and I'm not really talking about any technical one in particular.

To my eyes it is "what can my money yield in interest?" All I know is that if you buy a house for £100, rent it out for £10 per year but pay £9 in mortgage, it ain't yielding 10% in my bank account.

Again, very simple point, but I don't know how we can have multiple page threads like this without referring to this.

Even BTL investors don't generally have hundreds of thousands of pounds liquid cash to invest in houses. For this reason, yield as discussed here, with no reference to cost of funding, is meaningless.

Simples?.

Edited November 20, 2010 by Kyoto

[Secret Squirrel]

I've been eyeing up a lovely flat, it's a studio and there's one for sale at £185k, or this one to rent at £550/month. The one for sale is very dated, the one for rent is smart enough but not all blinged up.

So I got to wondering how low I could offer for the rental, I noticed it'd already dropped from £575/month and I can't really afford the £550, but I see it as an opportunity to live somewhere gorgeous for a year or so, that would be impractical to actually own due to remoteness.

The service charge is £160/month, the agent fees are 10%/month. So I figured the LL would be forking out £160+£55/month, or £215/month - meaning the actual rent part in his hand (before any other consideration) is £335/month - so that's 2.1%

I also spotted another one about 5 miles up the road, lovely views which caught my eye. That one's got 2 beds and is up for sale and rent. £100k or £550/month, with 10% agent fees and £1000/year service charge, so the yield on that one's 4.98%.

are you sure the Landlord pays the service charge for you .. most don't ?

The difference is what interests me too though .. if i look at places to rent for £500 /month their actual values will differ wildly (obv a nice secure let is worth accepting slightly less but not too much)

Some of the cheaper end apartments just seem at a huge buy / let ratio to me (Just as a Gauge)

Personally i'd opt for rents being too high .. but maybe both rental & asking prices are

Edited November 21, 2010 by Secret Squirrel