Jump to content
House Price Crash Forum
Sign in to follow this  
Jumble

Why Is It Important For Btlr's To Sustain A Positive Yield?

Recommended Posts

I've seen it stated here that yield on BTLs should be positive, and one would be a numpty to accept otherwise. But I dont understand why???

It's nice, its business like, but is it the only sensible option?

Share this post


Link to post
Share on other sites

I've seen it stated here that yield on BTLs should be positive, and one would be a numpty to accept otherwise. But I dont understand why???

It's nice, its business like, but is it the only sensible option?

Honestly is that a serious post? you really can't see why? :blink::unsure:

Share this post


Link to post
Share on other sites

Ok, here's a thought.

Go to your boss, and instead of him paying you, tell him that you're going to pay him for every hour that you work for him.

Try that for a few days, and then see how long you want to keep the job.

If you think that's a good way for you to create wealth, then I'd suggest you get into BTL as soon as possible, you don't want to miss the boat.

Edited by BandWagon

Share this post


Link to post
Share on other sites

I've seen it stated here that yield on BTLs should be positive, and one would be a numpty to accept otherwise. But I dont understand why???

It's nice, its business like, but is it the only sensible option?

I`m never rude, so please excuse me whilst I attempt to be as polite as I can. With respect, in my time posting, reading and at one time lurking on this forum, that is the single most stupid post I have ever witnessed. :o

Share this post


Link to post
Share on other sites

Honestly is that a serious post? you really can't see why? :blink::unsure:

I am sure this is a serious post...and indeed she has raised a very important question.

As any property invester will tell you, the real gains from property are those of 'capital gains' at the time of disposal. The 'rental' yeild is merely to be able to sustain that business model till the time comes to sell up. If you are able to top up the rental yeild on a regular basis, then there is ABSOLUTELY no reason for you to insist on a 'positive' rental yeild (however this helps maintain a positive cash flow for relatively 'hard up' investors!)

In fact traditionally the properties with the most capital gains (e.g. in prime central London) have almost never been 'cash flow positive'

Share this post


Link to post
Share on other sites

I've seen it stated here that yield on BTLs should be positive, and one would be a numpty to accept otherwise. But I dont understand why???

It's nice, its business like, but is it the only sensible option?

Jumble this.... OMITS CASH

:lol:

Share this post


Link to post
Share on other sites

I've seen it stated here that yield on BTLs should be positive, and one would be a numpty to accept otherwise. But I dont understand why???

It's nice, its business like, but is it the only sensible option?

..i would say between 1999 - 2004 it didn't matter at all if a property had a negative yield.. as rampant HPI would bail out the investor...

..however with HPI now all but stopped... a negative yield is a one way ticket to bankruptcy... especially if the property is a geared investment.... :unsure:

Edited by how much...?? you must be joking

Share this post


Link to post
Share on other sites

I am sure this is a serious post...and indeed she has raised a very important question.

As any property invester will tell you, the real gains from property are those of 'capital gains' at the time of disposal. The 'rental' yeild is merely to be able to sustain that business model till the time comes to sell up. If you are able to top up the rental yeild on a regular basis, then there is ABSOLUTELY no reason for you to insist on a 'positive' rental yeild (however this helps maintain a positive cash flow for relatively 'hard up' investors!)

In fact traditionally the properties with the most capital gains (e.g. in prime central London) have almost never been 'cash flow positive'

I take it you are a BTL investor then.

Share this post


Link to post
Share on other sites
Guest wrongmove

Go to your boss, and instead of him paying you, tell him that you're going to pay him for every hour that you work for him.

An opposing analogy - go and tell your stockbroker that he must pay you to buy shares off him/her.

I don't agree with the following argument, but some would say that if you are building a proprty portfolio as an alternative to a traditional pension, you might expect to have to pay in for a while. But over time, inflation increases both the rent you can charge, and the capital value of your property.

I certainly "subsidise" my (traditional) pension fund by a few hundred pounds a month !

I must repeat that I don't agree with this, but if enough people do, it will help support prices.

Edited by wrongmove

Share this post


Link to post
Share on other sites

I've seen it stated here that yield on BTLs should be positive, and one would be a numpty to accept otherwise. But I dont understand why???

It's nice, its business like, but is it the only sensible option?

if you are so generous that you like subsidising where strangers live then having a negative yield would be fine.

and unless you are very wealthy or have a high paid job then you are likely to become very poor following this strategy. If your property goes up in value though you wll do ok. But that is a very big if.

and what is business like about losing money each month.

Share this post


Link to post
Share on other sites

I'm completely serious, and whilst at first sight the answer seems obvious, rather than treat me like a dumb blonde (btw I'm not blonde, at least most months I'm not...), think more deeply.

Even without HPI, positive yield (or positive cashflow) may not be all that important to certain classes of investor.

Well done optimist; you seem a little smarter than most here.

Share this post


Link to post
Share on other sites

..i would say between 1999 - 2004 it didn't matter at all if a property had a negative yield.. as rampant HPI would bail out the investor...

..however with HPI now all but stopped... a negative yield is a one way ticket to bankruptcy... especially if the property is a geared investment.... :unsure:

That is certainly true...relatively speaking though. At times of rampant HPI, it is easy to lose sight of the fact that property investments if almost always a relatively long term (atleast 5, ideally >10 years) investment. At such times, several 'me too' newbie landlords join the stampede. However at times when HPI is low, seasoned investors would still keep the long term horizin, and would (should) have the buffer money to be able to top up the rental shortfalls. The important thing is though that the property itself should have inherent qualities (location etc.) that should make (long term) capital growth certain.

Share this post


Link to post
Share on other sites

I've seen it stated here that yield on BTLs should be positive, and one would be a numpty to accept otherwise. But I dont understand why???

It's nice, its business like, but is it the only sensible option?

If there was a chance of a significant gain then it makes sense.

Is that the case now?

Its a gamble and I wouldn't waste my money on such a gamble back in 2003 when we sold our BTL. Granted prices have risen since then (but merely from totally mad to absolutely insane).

Now circa 2010 or so I may get back into that market

Share this post


Link to post
Share on other sites

I am sure this is a serious post...and indeed she has raised a very important question.

As any property invester will tell you, the real gains from property are those of 'capital gains' at the time of disposal. The 'rental' yeild is merely to be able to sustain that business model till the time comes to sell up. If you are able to top up the rental yeild on a regular basis, then there is ABSOLUTELY no reason for you to insist on a 'positive' rental yeild (however this helps maintain a positive cash flow for relatively 'hard up' investors!)

In fact traditionally the properties with the most capital gains (e.g. in prime central London) have almost never been 'cash flow positive'

Why do BTL'rs look for thier magical BMV properties then? surely you could buy any property and make a killing on it.

I will pay £1,000,000 and charge £50 a month rent, why wont that work? after all in 10 years time i can sell it for £2,000,000 because thats where the real money is.

Actually no, since a positive yield doesnt matter i will pay you £50,000,000 for it ( i wouldnt want to get gazumped now would i) and just so i dont lose my tenants i will charge £25 a month.

Ive just had a revalation, tenants annoy me, i will pay you £100,000,000 for it and have no tenants at all. Positive yields just dont matter.

Ive got another great idea, i could PAY tenants to live in my property, that would be a great laugh.

I hope my Business model can survive more than ... doh its dead already i must be a 'hard up' invester.

Share this post


Link to post
Share on other sites

or more stupid depending upon your perspective

well honestly...I don't know whether I am wiser than most or more stupid. I just have aslightly different opinion from many on this site and do not hesitate to air it. After all, that's the point of this website isn't it?! To be able to get the 'other' perspective and hopefully learn from it?!

Share this post


Link to post
Share on other sites

I'm completely serious, and whilst at first sight the answer seems obvious, rather than treat me like a dumb blonde (btw I'm not blonde, at least most months I'm not...), think more deeply.

Even without HPI, positive yield (or positive cashflow) may not be all that important to certain classes of investor.

Well done optimist; you seem a little smarter than most here.

No HPI and negative yield?

Sorry I must be dumb as f*ck,

Please explain to me why any investor would want to do that

Share this post


Link to post
Share on other sites
Guest wrongmove

I will pay £1,000,000 and charge £50 a month rent, why wont that work? after all in 10 years time i can sell it for £2,000,000 because thats where the real money is.

Many on this site are buying gold, which yields exactly 0%, for just the reasons you describe.

In fact, you usually have to pay someone to look after your gold for you, so it's gross yield is negative.

Edited by wrongmove

Share this post


Link to post
Share on other sites

Why do BTL'rs look for thier magical BMV properties then? surely you could buy any property and make a killing on it.

I will pay £1,000,000 and charge £50 a month rent, why wont that work? after all in 10 years time i can sell it for £2,000,000 because thats where the real money is.

Actually no, since a positive yield doesnt matter i will pay you £50,000,000 for it ( i wouldnt want to get gazumped now would i) and just so i dont lose my tenants i will charge £25 a month.

Ive just had a revalation, tenants annoy me, i will pay you £100,000,000 for it and have no tenants at all. Positive yields just dont matter.

Ive got another great idea, i could PAY tenants to live in my property, that would be a great laugh.

I hope my Business model can survive more than ... doh its dead already i must be a 'hard up' invester.

The reason, Chuz, why investors look for BMV is simple....It could be one of three

1. For rapid returns, ie., buy BMV and then sell at market value and pocket the profit

2. For equity release,ie, buy at BMV, quickly remortgage at MV and use the funds to fund the next purchase

3. To get a head start if planning to let the property out for the long term, ie., you've already got a 'profit' on your property by purchasing BMV which will be realized as and when you do sell a few years later.

I hope that is clear to you

And PLEASE do not come up with totally outlandish and mythical figures to back up your arguement...it is counterproductive and does nothing to encourage a sensible debate.

Share this post


Link to post
Share on other sites

I've seen it stated here that yield on BTLs should be positive, and one would be a numpty to accept otherwise. But I dont understand why???

It's nice, its business like, but is it the only sensible option?

I'd also imagine you could find ways to make superficial losses into positive by 'declaring' lots of repair work on the properties. I'm not a LL but I am sure there are lots of subtle tax dodges that could keep your head above water.

Also, you could use the long term net worth of the business to borrow more money to fund other business ventures.

(If you were brave!!!)

I don't think I will venture into BTL any time soon though!!!

Edited by Without_a_Paddle

Share this post


Link to post
Share on other sites

Many on this site are buying gold, which yields exactly 0%, for just the reasons you describe.

In fact, you usually have to pay someone to look after your gold for you, so it's gross yield is negative.

isn't the point that it's ok to buy something with no positive net yield if their is capital gain but at pesent there is no capital gain on residential property?

Share this post


Link to post
Share on other sites

well honestly...I don't know whether I am wiser than most or more stupid. I just have aslightly different opinion from many on this site and do not hesitate to air it. After all, that's the point of this website isn't it?! To be able to get the 'other' perspective and hopefully learn from it?!

You don't follow the site mantra "BTL is bad", so will come in for criticism.

Investing in property and shares is mostly about capital gain.

The trick to being succesful is timing.

Now is obviously a bad time to buy property.

Share this post


Link to post
Share on other sites
Guest wrongmove

isn't the point that it's ok to buy something with no positive net yield if their is capital gain but at pesent there is no capital gain on residential property?

If you buy property for cash (like most people buy gold) the net yield is positive. Even if you buy gold with cash, it has a negative or zero yield.

Edited by wrongmove

Share this post


Link to post
Share on other sites

If you buy property for cash (like most people buy gold) the net yield is positive. Even if you buy gold with cash, it has a negative or zero yield.

gold is a funny animal,like cash.

if you have it in your wallet it will not earn you interest,but it is there should you need to spend it.

one should not forget little crises like argentina.....when their banks went pete-tong all assets in them got frozen...so nobody could withdraw money when they needed it most.

....it's quite a good plan to have a little bit of barter-power in the back pocket.

Share this post


Link to post
Share on other sites

If you buy property for cash (like most people buy gold) the net yield is positive. Even if you buy gold with cash, it has a negative or zero yield.

Investors buy gold as a hedge against some other asset. Yield doesn't come into it. Speculators, like property flippers, are looking for quick capital gains.

Edited by gone west

Share this post


Link to post
Share on other sites
Guest
This topic is now closed to further replies.
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.