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1 bed flat somewhere pricey (much as y'all sound like perfectly reasonable loons onscreen, the Internet just ain't the place to go handing out postcodes, you know what I mean?) - currently ~3.6%-ish gross yield for its owner. Costs (interest cover, ground rent, building maintenance, fixtures & fittings) aren't cheap and aren't optional at this end of the market if you care about retaining resale value. Capital appreciation looks much better - but only on paper (you'd need to find someone to buy it...), and only if you "forget" about replacement costs (the asset is merely tracking comparables).

It's a mug's game. Even the bumbling dingleberries running my pension funds are creating more value.

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What's wrong with RB's post? His LL is getting about 3% yield, same as mine.

Ah, but you don't have Swedish windows with special titanium coating... :lol:

£80 (5000 Thai baht) per month on a £15000 (1000 000 Thai baht) apartment

Yield 6.4%

The weather in Chiang Mai is very nice as well.

Lucky *******... B)

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Property: Detached Bungalow

Location: Christchurch, Dorset

Rent: 750 a month

Value: 240,000

Yield: 3.75%

Conclusion: Better off in the bank with interest rates rising and property prices soon to be falling

Tip to BTL investors: Good time to get out at the top :)

My last two BTL purchases are as follows.

Apt 1 - Value £84k, Rent £525 (£6300 p.a) = 7.5% - Purchased May 05 - fixed 3 years (capital repayment)

Apt 2 - Value £94.5k, Rent £480 (£5760 p.a) = 6.1% - Purchase May 06 - fixed 3 years (capital repayment)

I see most posts made so far are showing yields of around 3-4%, given that average BTL yields are currently running at 6%, I guess posters with a high rent yeild are unwilling to post!

astos

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If the landlord:

1. believes rents will rise in the future;

2. believes yields will remain low for this asset class for evermore;

3. enjoys owning property for its own sake;

4. is clueless

they will continue to hold despite low yields.

There are other, less pejorative, reasons for holding a low-yielding property:

1. It may be high-yielding when taking the purchase price rather than the current value. If the LL is not intending to retire anytime soon, the effect of CGT and transaction costs might outweight the benefits of selling up when prices are high (and therefore yields are low) and buying again when prices are low. Better to simply ride the waves and stay in the market.

2. It might be a retirement property or dream home that the intend to move into in 15 or 20 years time. The odd fluctuation isn't that important to the LL who is looking at a 20 year timeframe and wants a specific property.

3. It may be a case of asset diversification. If you're wealthy enough, it makes sense to spread your wealth across as many major investment classes as possible as your primary concern becomes wealth protection, rather than wealth creation. What's the better bet? Put every penny you own into the single asset class that you expect to perform best and risk that asset class bombing, or spread amongst various classes accepting a lower overall return for the safety of diversification?

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There are other, less pejorative, reasons for holding a low-yielding property:

1. It may be high-yielding when taking the purchase price rather than the current value. If the LL is not intending to retire anytime soon, the effect of CGT and transaction costs might outweight the benefits of selling up when prices are high (and therefore yields are low) and buying again when prices are low. Better to simply ride the waves and stay in the market.

2. It might be a retirement property or dream home that the intend to move into in 15 or 20 years time. The odd fluctuation isn't that important to the LL who is looking at a 20 year timeframe and wants a specific property.

3. It may be a case of asset diversification. If you're wealthy enough, it makes sense to spread your wealth across as many major investment classes as possible as your primary concern becomes wealth protection, rather than wealth creation. What's the better bet? Put every penny you own into the single asset class that you expect to perform best and risk that asset class bombing, or spread amongst various classes accepting a lower overall return for the safety of diversification?

You chopped off my first paragraph which covers these points. Hassle, tax-leakage, inertia: all reasons to hold. They are not GOOD reasons to hold. Turn the question around: at what price (yield) would a landlord sell up?

Your point 3. You can bet that the least diversified of all investors are the property investors.

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[ ... snip ... ]Turn the question around: at what price (yield) would a landlord sell up?[ ... snip ...]

My guess would be that a commercially successful landlord would not in fact sell any individual property title directly unless cashflow were in fact negative. My guess would be that a commercially successful landlord would wait until monetary policy were accomodative enough and a given asset portfolio were large enough to allow them to place the lot into a trust and then front-load it with debt, or, float it, or some combination of both.

To borrow someone else's exceedingly apt phrase though, the current raft of bought-too-late speculators are more likely to stay true to form and panic as the market tops. There is no reason whatsoever to assume at this stage that these sophisticates have gained any more understanding on this particular leg of their rollercoaster ride than those that preceeded it. The only thing that one might conclusively state is that the end of their ride is a little nearer now than it was, and that those selling the tickets are a little richer.

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My guess would be that a commercially successful landlord would not in fact sell any individual property title directly unless cashflow were in fact negative. My guess would be that a commercially successful landlord would wait until monetary policy were accomodative enough and a given asset portfolio were large enough to allow them to place the lot into a trust and then front-load it with debt, or, float it, or some combination of both.

Waiting for cash flow to go negative is not something a "commercially successful landlord" would allow. Discounting the projected rental income cash flows at a suitable yield (discount rate) would tell him when the present value was less than he could achieve in a sale. Why hold in that case?

As to floating his portfolio - dream on!

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Property bought 3 months ago for £108k

Rent is £550 per month

I make that a 6.1% yield

...I'm the owner, not the tenant. I'm one of those "idiot" BTL landlords.

It sounds like most of the country has been BTLed to death though, from the previous accounts.

What is your yield after costs i.e. insurance repairs you can get 8% from high-income bonds if you use your allowance this can be tax-free. If your property increases in value you will have to pay some capital gains tax, (40%)as it is not your primary residence on its sale.

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Why hold in that case?

... for the very same reason you've already identified - the punative transactional costs (including taxes).

I'm not disagreeing with your analysis at all, don't get me wrong; but listed property trust do exist and in times of extremely permissive monetary policy tend to first sprout like field mushrooms and then go public. The bulk of them are commercial, which makes this an apples/ oranges comparison - but assuming this will always be the case seems an artifical constraint to me. Presently, the market maker is the mortgage issuer, and the bulk of these are geared from institutional lending of one sort or another. If the bulk of private property is held under mortgage, then from one perspective the very largest landlords are these same institutional lenders (I daresay the largest private BTL portfolio is easily dwarfed by the holdings of the smallest friendly society) - and the bulk of these are indeed listed entities, capitalised on the back of these very same assets.

It'll be entertaining to discover over the next few decades if there is enough pent-up demand for direct inward investment into the residential sector (and assets within it selling at great enough discounts in the years ahead) to allow residential listed trusts to get off the ground.

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... for the very same reason you've already identified - the punative transactional costs (including taxes).

That's why I carefully chose the word "achieve" i.e. his net realisable proceeds from the sale. If transaction costs are so punitive, it begs the question who would want to enter such an illiquid investment now?

I'm not disagreeing with your analysis at all, don't get me wrong; but listed property trust do exist and in times of extremely permissive monetary policy tend to first sprout like field mushrooms and then go public. The bulk of them are commercial, which makes this an apples/ oranges comparison - but assuming this will always be the case seems an artifical constraint to me. Presently, the market maker is the mortgage issuer, and the bulk of these are geared from institutional lending of one sort or another. If the bulk of private property is held under mortgage, then from one perspective the very largest landlords are these same institutional lenders (I daresay the largest private BTL portfolio is easily dwarfed by the holdings of the smallest friendly society) - and the bulk of these are indeed listed entities, capitalised on the back of these very same assets.

It'll be entertaining to discover over the next few decades if there is enough pent-up demand for direct inward investment into the residential sector (and assets within it selling at great enough discounts in the years ahead) to allow residential listed trusts to get off the ground.

I don't understand your property trust example and how it would apply to residential landlord with less than 50 properties, say. Could you expand in some more detail?

How does a landlord exit? What is his exit strategy? How does the landlord realise his equity gains?

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how it would apply to residential landlord with less than 50 properties

It wouldn't - even if we were talking Chelski and optimistically allowed 50 properties to have a £500m cap then this is still not enough to create a liquid market in the trust's equity. And regardless of depth - I'd anticipate that the hypothetical investors would want more in-sector diversity than any portfolio this small would allow (an outright failure of any one residential property in a portfolio of 50 is still too statistically likely ie still measurable).

How does a landlord exit? What is his exit strategy? How does the landlord realise his equity gains?

Exit strategy is to place the property titles into a beneficial trust in perpetuity and then load the trust with debt (paying a dividend in the process) or issue an equity stake in it on market or some combination of both.

It would be politically more palatable to regulate such entities than private BTL landlords as the investment is depersonalised and less emotive for the individual share owner. With some luck the looming swing in sentiment will provide the fundamentals needed to force us into some sort of brave new world, and perhaps with it offer a window of opportunity to decouple long-term rights of residence from underlying rights of tenure. If tenure is traded fractionally on an open market sufficiently regulated to allow for rights of residence to be maintained (indeed, priced), perhaps some of the present stressors will diminish.

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It wouldn't -

...snip...

Exit strategy is to place the property titles into a beneficial trust in perpetuity and then load the trust with debt (paying a dividend in the process) or issue an equity stake in it on market or some combination of both.

So your float idea is irrelevant for 99% of residential landlords? I'm not sure why you are proposing it as a viable exit strategy. :blink: Swapping debt for equity is likely to upset the mortgagees (LTVs etc).

It would be politically more palatable to regulate such entities than private BTL landlords as the investment is depersonalised and less emotive for the individual share owner.

:blink:

You envision some form of capital market in residential property shares? A homogenous share worth whatever, which gives you a right to a leveraged rental income stream from a portfolio of properties? Renters can participate too - pay rent with one hand and collect your dividends in the other! Genius. Now, how do I buy that dream home?

With some luck the looming swing in sentiment

Please explain. (I can assume what you mean, but I'd rather you spell it out.)

will provide the fundamentals

Please explain: sentiment forms fundamentals?

needed to force us into some sort of brave new world, and perhaps with it offer a window of opportunity to decouple long-term rights of residence from underlying rights of tenure.

:blink:

Please explain. It's already decoupled: you can rent or you can buy. You can do both!

If tenure is traded fractionally on an open market sufficiently regulated to allow for rights of residence to be maintained (indeed, priced), perhaps some of the present stressors will diminish.

I'd suggest you use plain English if you wish to be understood (assuming you understand what it is you are attempting to convey in the first place). I'll give you the benefit of the doubt: you may be being obtuse for a reason. Or you could be deranged. Hard to tell at the moment. :D

Phew, that's tired me out. Time for a beer.

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I agree, people who 'got in' at the right price will be quids-in pretty much regardless of what happens – and this is a good thing – we need a rental market.

You’re really quids-in if you have paid off your mortgage early / quickly, maybe by putting you net yield straight back into a over-payment vehicle.

Then, as long as you are happy to keep hold of your asset, your income stream is relatively secure (there will be exceptions; certain rental markets seem to be saturated, but where I am the rental market is healthy (lots of students)).

I agree with the above but it still doesn't necessarily make sense to keep the BTL even if one bought years ago. I always work my yields out on what the value of the property is now, not on what it was when I bought. For example I bought 3 properties in 2000. Cost in total £221k (about half on mortage). I let them out as holiday flats. Income £38k/annum, therefore yield roughly 17%. Income is now roughly £45k/annum but the properties are 'worth' £750k, therefore yield now 6%.

I don't just sit on my backside and watch the money roll in - I run the business myself entirely so it does require a lot of work! If I sell up now I could get almost as much income putting the money in the bank and doing **** all. Except I won't - I'll do something else instead. BTL only makes sense at the moment if one is assuming capital gains are still there to be made in the next few years. I can't see that happening. At least not to anything like the extent we've seen the past few years. Holiday lets are classed as a business asset so I'll only be subject to 25% of the chargeable gain. Seems fair enough considering it's been a fantastic investment. Now it's time for something else. The next bubble. Suggestions welcome!

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You chopped off my first paragraph which covers these points. Hassle, tax-leakage, inertia: all reasons to hold. They are not GOOD reasons to hold. Turn the question around: at what price (yield) would a landlord sell up?

I didn't mention hassle or intertia, but tax-leakage, transaction costs or any other financial aspect involved has to be considered when comparing the returns of selling or holding and may, therefore, represent a good reason to hold. Wouldn't you bear in mind taxation when comparing a cash ISA and a taxed savings account?

Your point 3. You can bet that the least diversified of all investors are the property investors.

Inherently, the most diversified investors must be (to some extent) invested in property!

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Your point 3. You can bet that the least diversified of all investors are the property investors.

Yep, hundreds of thousands into property and just how do you diversify that and how much?. Since you obviously have done financial investment 101 (and most of you have masters in economics, lol) maybe you can tell us using financial modelling??

Putting 20K into gold and other mickey mouse investments won't do it, to really diversify you need to stump up large amounts into quite a few areas and even then the benefical effects of diversification are not guranteed ..you may well get the mix wrong. Better to do one thing really well than many things half baked methinks.

Most ordinary investors don't have this sort of capital so diversfication really is a pipe dream.

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  • 442 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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