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Jason

Rental Yields 4.68% Net

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I have just been looking around BTL figures, and there is alot of information at www.arla.co.uk. I'm not sure if there recent reports have been mentioned:

Q4 2005: The ARLA Review & Index of Returns on Residential Investment

Q4 2005: Survey of ARLA Member Letting Agents

"The average weighted rental returns for both houses and flats have remained unchanged at 4.9% and 5.1% respectively compared with August."

NET figure is 4.68% (after voids taken into account) for CASH buyers.

"The average capital asset value of rented houses has fallen by 1.5% overall over the last three months as a result of falls in the Rest of the South East and the Rest of the UK whilst average values for Prime Central London rose marginally. Over the same period the average value of rented flats throughout the country declined with the largest fall being 9.0% for the Rest of the UK."

"The average void period is unchanged at 27 days compared with the third quarter of 2005 and this stable position applies in the Rest of the South East and the Rest of the UK with the average for Prime Central London having come down a little."

So, BTL is a good investment?

Can anyone find credible nominal rental figures for the past 5 years?

Edited by Jason

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I'll reply :0).

Guy who is the same trade as me has a partner who works in repo's , she's very busy.

Another says his accountant has told him that of around 100 btl's who's books he does , only about 4 or 5 actually make money. As you've pointed out these are the CASH buyers and not the mewer's.

Dames

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Where do ARLA get their capital appreciation figures from?

Their tables show 8.8% capital appreciation in all areas last year??

Nice to see that geared landlords in the south west are making a 2%+ loss though.... and I suspect that is conservative.

And 8.8% captial appreciation in the south west just didn't happen.

The flat I rent cost my landlady £155K in 2003, I doubt she would find someone to buy it at that price today.... she will have seen no capital appreciation. :lol::lol:

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How does the ARLA define "net"? From Jason's post it just looks like they are accounting for void periods but are ignoring all other costs such as agents fees and repairs, if so then the true net yeild is lower still.

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In Paris, GROSS rental yield is around 4% (rent 20 €/sqm/month and price approx 6000 €/sqm)... experts say there is no bubble because it's higher than 10-year gvt bond (3,5%)... 0,5% ! Wow, what a risk premium for an illiquid asset peaking at all-time high :P

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How does the ARLA define "net"? From Jason's post it just looks like they are accounting for void periods but are ignoring all other costs such as agents fees and repairs, if so then the true net yeild is lower still.

If that is correct then it would significantly skew the figures.

Many letting agents charge 15% for manamgement services.

It is also not taking into account the ground rent/building management charges that are common with flats (esp. with new build city blocks).

My Rent is £625 a month.

Landlady loses 15% to letting agents for full managed service (as she lives in Switzerland).

Landlady loses £120 a month on building service charges (maintennance of communal areas, gardener etc)

That gives her £411.25 to play with before voids and maintennance.

Or £4935 a year.

So far this year she has had to pay (and these are conservative estimates):

2 x Boiler repair (£400?)

1 x new shower (£200 inc fitting?)

1 x new cooker (£250 inc fitting)

1 x drain unblocking (£100)

1 x new kitchen tap (£80 - that was plumbers actual quote :lol: )

Total Maintennance in the region of £1K, but probably quite high this year so call it £500.

That leaves £4435 a year before voids.

Take off ARLA's average voids period of 27 days/365 days......

Gives £4106.93.

The price paid in 2003 was £155K.

Yield (ignoring mortgage costs) is 2.65%.

Still a profit, but if £100K of the original purchase was on an IO mortgage (at 4.89% tracker rate) that would be £400+ a month in interest on the mortgage.

Taking £400 a month off of £4106.93 a year leaves - a loss of £693.07 a year.

For any landlord who bought in the last few years I expect these figures are more like what they know and love, rather than ARLA's version of events.

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  • 301 Brexit, House prices and Summer 2020

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      • down 5% +
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      • Even
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      • up 5%



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