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pauluk

Where Are The Worst Yields In The Uk?

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A big new development in Eastbourne is called the Boardwalk on Sovereign harbour. Two bed flats sell for approximately £230,000 and rent for around £650 to £700. That's a yield of 3.4% If you factor in voids, maintenance charges, letting agents fee and harbour charge you are looking at a loss. It seems to only make sense with HPI of 5% or more to make up the loss.

Are there lower yields around the country or is 3 to 4% the norm now?

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Lots of 3-4% yeilds in my area....all expenses considered (stamp duty, management costs, voids, maintenance, mortgage interest, opportunity/interest loss on equity, cost for time/effort) I would say 5% is not enough in a stagnant market and the break even has got to be around the 6-7% figure.

Personaly I think anything less than 10% is not worth the effort, BTL'ing is not like other investments where you can sit back and watch from a distance and needs managing.

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A big new development in Eastbourne is called the Boardwalk on Sovereign harbour. Two bed flats sell for approximately £230,000 and rent for around £650 to £700. That's a yield of 3.4% If you factor in voids, maintenance charges, letting agents fee and harbour charge you are looking at a loss. It seems to only make sense with HPI of 5% or more to make up the loss.

Are there lower yields around the country or is 3 to 4% the norm now?

Interesting to see that some of flats are up for re-sale as "never lived in" Who buys a flat never lives in it and then sells it!

http://www.homes4sail.co.uk/Propertyforsale.asp

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This is quite interesting.

http://www.londonpropertywatch.co.uk/avera...ntal_yield.html

Don't tell the BTL junkies, they'll be invading Rotherhithe.

On second thoughts, that wouldn't be such a bad idea...

Indeed:

1 Bedroom £173,000 (50) £387 pw (12) 11.6%

2 Bedrooms £247,000 (91) £340 pw (37) 7.1%

Trouble is before they know it Barratts will have moved in and built 300 1/2 bedders and average yields dip to sub-5%.

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It seems to be the newbuilds which are most affected which is why I guess lending on new flats is becoming harder and not available from some lenders.

In the example I gave the 3.4% yield was before expenses! Take off annual maintenance (£1,000), one month for letting agent and one month for voids and the return is 2.4% before mortgage interest. Say 90% mortgage and a BTL landlord is losing around £5,000 per year. So the flat would need to increase in value by over 2% per year to breakeven overall.

And as someone above pointed out prices are falling. The Boardwalk development is only third built. What happens when another 100 or so flats hit the market along with all the other developments being completed over the coming months?

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Centre of Leeds will be a BTL bloodbath..........Thousands of new £200k flats still being built and the ones already finished are having to be let to students because ''young professionals'' who can afford £200k prefer to live in established trendy suburbs with amenities than an inner city wasteland.......

Leeds ,,,,,compare Royal Armouries area with Chapel Allerton or Far Headingley

Manchester.......compare the new build area to the west of the centre with Chorlton and Didsbury.......

Prices are no higher in the trendy established areas than the newbuild wastelands

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Lots of 3-4% yeilds in my area....all expenses considered (stamp duty, management costs, voids, maintenance, mortgage interest, opportunity/interest loss on equity, cost for time/effort) I would say 5% is not enough in a stagnant market and the break even has got to be around the 6-7% figure.

Personaly I think anything less than 10% is not worth the effort, BTL'ing is not like other investments where you can sit back and watch from a distance and needs managing.

I think that the current situation has been arrived at by people being short-sighted. When house prices are rising, then BTL with a low gross return makes sense because the increase in total (paper + real) wealth is the rent received plus capital appreciation. So a shortfall in rent can be made up if the value of the property goes up. Hence while the market is going up, BTL'ers will pay more for properties than the rental return will justify in the expectation of capital gains. But, as soon as prices stagnate or start going down, as they are in quite a few places around the country, the picture changes dramatically. To get an acceptable return from the property then rent has to be high enough to make up for the captial depreciation, and will have to go up considerably. So the value of the properties for BTL landlords goes down, and prices are likely to follow.

Certainly I believe that it's possible for the gross rental return that a landlord really needs to make a reasonable profit on a rental property could be 3% one year, and 10% a year or two later.

A big new development in Eastbourne is called the Boardwalk on Sovereign harbour. Two bed flats sell for approximately £230,000 and rent for around £650 to £700. That's a yield of 3.4% If you factor in voids, maintenance charges, letting agents fee and harbour charge you are looking at a loss. It seems to only make sense with HPI of 5% or more to make up the loss.

Are there lower yields around the country or is 3 to 4% the norm now?

I'm sure we've seen people quoting yields less than 2% on this board.

Billy Shears

Edited by BillyShears

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Billy Shears

You make a good point about BTL's looking at total return on the way up and not worrying about a loss on the rental side. As the situation goes into reverse with house prices stalling/falling the losses will escalate in areas with large numbers of BTLs as landlords sell up further depressing prices and lowering rents until there is some equilibrium again.

Prices don't even need to fall to start a sell off because overall return will be negative with stalled prices. And there are selling costs to consider.

Edited by pauluk

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a friend has had their rent lowered from £600 per month to £550 per month, as they have been a good tennant. this is in dorset. (where house prices have fallen -7%) I dont know if the landlord is a come lately or an old player, but whatever it is it looks good for tennants from this anectodal

nice one

Edited by notanewmember

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gf's sister rented a 1 bed there for 400 a month (he was asking 650). They left last month. It's a dire place.

I believe they've gone back to their mum's.

As for worse yield, I believe Wandsworth is particularly bad right now.

Apparently landlrds there have to convert attics in order to try and cram enough Croatians in just to cover an IO mortgage.

Nightmare.

AND wandsworth fell 8% last quarter, according to the BBC.

AH, 'up the junction' indeed.

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There are going to be variations within areas. I rent in Eastbourne and pay £650 per month for a flat worth about £200,000. So that's a gross yield of 4%, I have rented it for three years at the same rent and believe it has increased in value by £20,000 or so.

Overall I have lost as a Sell To Rent person and the BTL landlord has gained. However, if i had started renting about 1 year ago the situation would be reversed.

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Billy Shears

You make a good point about BTL's looking at total return on the way up and not worrying about a loss on the rental side. As the situation goes into reverse with house prices stalling/falling the losses will escalate in areas with large numbers of BTLs as landlords sell up further depressing prices and lowering rents until there is some equilibrium again.

Prices don't even need to fall to start a sell off because overall return will be negative with stalled prices. And there are selling costs to consider.

My view is that if you are looking at BTL "for the long term" as sooooo many of the newbie LL's say they are then you should dis-regard capital growth from the equation and treat that as a termination bonus. At worse you should assume RPI inflation into your figures over a long term (15 years) assuming you are not daft enough to buy at peak.

The "business" needs to be able to wipe it's own ar$e (i.e. positive cashflow) and provide a return for the effort/risk expended. Capital can earn 5% in risk/hassle-free investments such as an ISA....mortgage debt costs approx 5% to service. So anything less than 7% and you are in potential -ve territory taking voids/maintenance etc into account.

The yield needs to be one you can expect to reasonably get on the open market and not one subsidised up as part of a 2-year incentive deal as part of a new-build. So many new-builds now come with rental guarantees, once the 2 years is up the LL is lucky to secure 3.5%.

If you are a short-term investor/speculator then you may be inclined to take a cashflow hit in order to realise a quick dash-and-grab capital gain.

Having said all that......I wouldn't touch anything to do with property & certainly not at the moment....all overpriced, over-hyped and at risk of wide ranging fall-out.......besides it's rarely about dealing with those "young city professionals" who always pay on time and quite often you have to deal with deprived or troublesome tenants.

BTL? wouldn't touch it with a barge pole! B)

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Guest Guy_Montag

The best one I've seen was sold as:

two bed, mid-terraced place.

both beds rented out at £60 pw = £6240

Asking price OO £180,000

Yield: 3.46% gross

This was about 6 months ago in an (albeit desirable, student) part of the North east.

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  • 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%



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