Passive Income
Discussion
jonny70 said:
Very interesting and thanks for posting.
Im considering my first BTL an was told to buy on the income/rent/yield. I live in the NorthWest .Whats your take /advise for newbie considering there first (something like a 70-80k house on the outskirts of manchester , no crappy areas and a decent rent )
Got nay good advise/pitfalls to avoid etc
Why are you doing it?Im considering my first BTL an was told to buy on the income/rent/yield. I live in the NorthWest .Whats your take /advise for newbie considering there first (something like a 70-80k house on the outskirts of manchester , no crappy areas and a decent rent )
Got nay good advise/pitfalls to avoid etc
jonny70 said:
Long term investment use the profits too pay off the mortgage
Okay well in that case I don't necessarily agree with the advice you've been given to buy yield.At the risk of insulting your intelligence, yield is the annual rent divided by capital value x 100. Generally speaking higher yield is associated with riskier, low value properties which tend to have weaker capital growth. What you'll have when you've paid off the mortgage is an unencumbered but not particularly desirable property. As an example, post-war ex-council houses tend to yield well but perform poorly capital value wise when compared to similar sized Victorian properties.
What you seem to want is a property that will be worth as much as possible when it is paid off, and for someone else to be effectively paying the mortgage for you, right? So I would be looking for the best property you can find (location is important) that will allow you to achieve that.
Bear in mind though that only mortgage interest is tax deductible, capital repayments are not. Most running costs and repairs are tax deductible against income, capital improvements such as an extension are not. But you can claim the cost against the capital gain when you sell.
Don't rule out buying a property that doesn't quite cover its own costs and into which you need to drop some cash, if it's in a historically good area and as a consequence likely to increase in value well over the time you own it.
Eleven said:
Okay well in that case I don't necessarily agree with the advice you've been given to buy yield.
At the risk of insulting your intelligence, yield is the annual rent divided by capital value x 100. Generally speaking higher yield is associated with riskier, low value properties which tend to have weaker capital growth. What you'll have when you've paid off the mortgage is an unencumbered but not particularly desirable property. As an example, post-war ex-council houses tend to yield well but perform poorly capital value wise when compared to similar sized Victorian properties.
What you seem to want is a property that will be worth as much as possible when it is paid off, and for someone else to be effectively paying the mortgage for you, right? So I would be looking for the best property you can find (location is important) that will allow you to achieve that.
Bear in mind though that only mortgage interest is tax deductible, capital repayments are not. Most running costs and repairs are tax deductible against income, capital improvements such as an extension are not. But you can claim the cost against the capital gain when you sell.
Don't rule out buying a property that doesn't quite cover its own costs and into which you need to drop some cash, if it's in a historically good area and as a consequence likely to increase in value well over the time you own it.
Good advice.At the risk of insulting your intelligence, yield is the annual rent divided by capital value x 100. Generally speaking higher yield is associated with riskier, low value properties which tend to have weaker capital growth. What you'll have when you've paid off the mortgage is an unencumbered but not particularly desirable property. As an example, post-war ex-council houses tend to yield well but perform poorly capital value wise when compared to similar sized Victorian properties.
What you seem to want is a property that will be worth as much as possible when it is paid off, and for someone else to be effectively paying the mortgage for you, right? So I would be looking for the best property you can find (location is important) that will allow you to achieve that.
Bear in mind though that only mortgage interest is tax deductible, capital repayments are not. Most running costs and repairs are tax deductible against income, capital improvements such as an extension are not. But you can claim the cost against the capital gain when you sell.
Don't rule out buying a property that doesn't quite cover its own costs and into which you need to drop some cash, if it's in a historically good area and as a consequence likely to increase in value well over the time you own it.
Eleven said:
Okay well in that case I don't necessarily agree with the advice you've been given to buy yield.
At the risk of insulting your intelligence, yield is the annual rent divided by capital value x 100. Generally speaking higher yield is associated with riskier, low value properties which tend to have weaker capital growth. What you'll have when you've paid off the mortgage is an unencumbered but not particularly desirable property. As an example, post-war ex-council houses tend to yield well but perform poorly capital value wise when compared to similar sized Victorian properties.
What you seem to want is a property that will be worth as much as possible when it is paid off, and for someone else to be effectively paying the mortgage for you, right? So I would be looking for the best property you can find (location is important) that will allow you to achieve that.
.
I know that the lower end of the market like ex council is really cheap stuff .Im not going there . What i would like is the right balance like a decent yield (so some profit to pay down the mortgage and a factor that i/r will increase which they eventually will ,so 5% yield atm may make you a little profit , it wont in a few years ) At the risk of insulting your intelligence, yield is the annual rent divided by capital value x 100. Generally speaking higher yield is associated with riskier, low value properties which tend to have weaker capital growth. What you'll have when you've paid off the mortgage is an unencumbered but not particularly desirable property. As an example, post-war ex-council houses tend to yield well but perform poorly capital value wise when compared to similar sized Victorian properties.
What you seem to want is a property that will be worth as much as possible when it is paid off, and for someone else to be effectively paying the mortgage for you, right? So I would be looking for the best property you can find (location is important) that will allow you to achieve that.
.
Where are you based in the country? flats or small houses? what do oyu prefer?
In the outskirts of Manchester you can buy 2/3 bedroom semis that are allright areas (not ex council)(see the thread in the lounge wwhere posters were stating they live in the North and pay 500 /600 qui in rent or mortgage and they dont live in s
t areas) and are u and coming areas where you can get a decent yield like 9% (and not renting to dhs ,your renting to normal working families ) I know this doesnt sound a lot of money for a small house but this is the North lol and not London jonny70 said:
I know that the lower end of the market like ex council is really cheap stuff .Im not going there . What i would like is the right balance like a decent yield (so some profit to pay down the mortgage and a factor that i/r will increase which they eventually will ,so 5% yield atm may make you a little profit , it wont in a few years )
That depends upon what rents do over the same period. And capital values for that matter but we'd be getting into too much detail.jonny70 said:
Where are you based in the country? flats or small houses? what do oyu prefer?
In the East Midlands. The properties we run are fairly esoteric and not something I would recommend you get involved with. In your position and with your stated requirement I would be looking at freehold houses (not ex local authority).jonny70 said:
In the outskirts of Manchester you can buy 2/3 bedroom semis that are allright areas (not ex council)(see the thread in the lounge wwhere posters were stating they live in the North and pay 500 /600 qui in rent or mortgage and they dont live in st areas) and are u and coming areas where you can get a decent yield like 9% (and not renting to dhs ,your renting to normal working families ) I know this doesnt sound a lot of money for a small house but this is the North lol and not London
I'd always suggest owning properties near where you live. If Manchester is near you and you can make local properties pay, go for it. But you need to accept that the asset you obtain in the process may be modest in value relative to prime properties elsewhere.t areas) and are u and coming areas where you can get a decent yield like 9% (and not renting to dhs ,your renting to normal working families ) I know this doesnt sound a lot of money for a small house but this is the North lol and not London Folks, let's assume you had a capital investment pot of £200k available to invest, desired outcome is £3k per month income. Let's also assume you decide to focus on Property in the UK to invest, how and where would people look to invest?
The £200k can be leveraged ie used as deposits for mortgage/mortgages...
Discuss....
The £200k can be leveraged ie used as deposits for mortgage/mortgages...
Discuss....
You are not going to get an 18% return. £36k out of £200k isn't going to happen unless you are going down some very high risk route.
That stands whatever route you go down. Personally I think that property is BTL is overrated as an investment choice, but it is all down to what you are good at. I've seen much better return from equities than I would have done from property. But there are two 'I's in that statement. I'd far rather spend a little of my time reading up on companies and making calls on them than I would dealing with the crap coming out of BTL. But it's personal choice.
As for gaining income out of £200k, well with tax to pay and inflation to adjust for... £10k income from £200k is 5% and might be something you could target.
That stands whatever route you go down. Personally I think that property is BTL is overrated as an investment choice, but it is all down to what you are good at. I've seen much better return from equities than I would have done from property. But there are two 'I's in that statement. I'd far rather spend a little of my time reading up on companies and making calls on them than I would dealing with the crap coming out of BTL. But it's personal choice.
As for gaining income out of £200k, well with tax to pay and inflation to adjust for... £10k income from £200k is 5% and might be something you could target.
Sideways Rich said:
Thanks, agreed equities are a good route however I have enough exposure there so was interested in looking at property.
Which equities are you interested in at present?
Well I tend to go in cycles according to when I have the time to look, I really need to be spending some now. I've been doing well out of Pace, Compass and Rolls Royce over recent times. I've taken profit on them now though, just wondering whether RR has new growth in it now it's dropped back some. I slightly irrationally like M&S at the moment, irrationally because I haven't really looked into it but it feels like what I also tend to look for which is a blue chip that has fallen but may be underpriced. But as I say, in all honesty I've bought without properly researching which isn't what I normally do.Which equities are you interested in at present?
But there are others, Berkley Group, Diageo, Babcock...The only two I'm down on are BG Group and Depenhams, which aren't ones I'm very proud of choosing.
But I'm talking about the past now, I need to spend some time looking at it again and rearranging a little.
Sideways Rich said:
Folks, let's assume you had a capital investment pot of £200k available to invest, desired outcome is £3k per month income. Let's also assume you decide to focus on Property in the UK to invest, how and where would people look to invest?
The £200k can be leveraged ie used as deposits for mortgage/mortgages...
Discuss....
£200k cash to investThe £200k can be leveraged ie used as deposits for mortgage/mortgages...
Discuss....
LTV of 66% would give you £600k to invest in UK BTL property
Property purchase price on average - £35k for a 2 bedroom ex council flat/house
Total rent: £5k pa
Net rent received - let's say £4k (after insurance, voids, repairs etc...)
£600k would give you 17 properties so net rent = 17 x £4k = £68k per year
Interest only mortgage at 5% of £400k (if wanting to maximise cashflow) = £20k pa
Income = Net rent (68k) - interest (20k) = £48k per year (£4k per month) = 24% Return on invested capital.
Risks:
- House prices fall = so what if you're concentrating on income and can service the debt
- Rents fall = would have to fall a LONG way for you to be in trouble (about 12% net rental yield)
- Interest rates rise = would have to rise by a LOT for you to be in any trouble
- Interest rates rise AND rents fall AND house prices fall = depends how risk averse you are
Edited by zuby84 on Wednesday 5th March 16:04
0000 said:
What?! 
I had no idea Rightmove went that low.
Ha, you'd be surprised - it goes even lower. I'm buying as many of these I can get my hands on. Got one for £20k and spent £500 on a new lick of paint and carpets so with legals etc.. cost £21k. Getting £100 per week for it. Currently got no empty properties and manage to collect about 90%+ of the rent for these type of places. Of course; you won't be able to do this "down south" and it can be a pain dealing with the feckless (but my staff does that for me.)I had no idea Rightmove went that low.
I could buy flats for £200k, but a fall in value of say even 5% would negate any income I make from the rent. The £20k property value would have to fall in value by 25% year on year for me to be "losing" money.
zuby84 said:
0000 said:
What?!
I had no idea Rightmove went that low.
Ha, you'd be surprised - it goes even lower. I'm buying as many of these I can get my hands on. Got one for £20k and spent £500 on a new lick of paint and carpets so with legals etc.. cost £21k. Getting £100 per week for it. Currently got no empty properties and manage to collect about 90%+ of the rent for these type of places. Of course; you won't be able to do this "down south" and it can be a pain dealing with the feckless (but my staff does that for me.)I had no idea Rightmove went that low.
I could buy flats for £200k, but a fall in value of say even 5% would negate any income I make from the rent. The £20k property value would have to fall in value by 25% year on year for me to be "losing" money.
zuby84 said:
£200k cash to invest
LTV of 66% would give you £600k to invest in UK BTL property
Property purchase price on average - £35k for a 2 bedroom ex council flat/house
Total rent: £5k pa
Net rent received - let's say £4k (after insurance, voids, repairs etc...)
£600k would give you 17 properties so net rent = 17 x £4k = £68k per year
Interest only mortgage at 5% of £400k (if wanting to maximise cashflow) = £20k pa
Income = Net rent (68k) - interest (20k) = £48k per year (£4k per month) = 24% Return on invested capital.
Risks:
- House prices fall = so what if you're concentrating on income and can service the debt
- Rents fall = would have to fall a LONG way for you to be in trouble (about 12% net rental yield)
- Interest rates rise = would have to rise by a LOT for you to be in any trouble
- Interest rates rise AND rents fall AND house prices fall = depends how risk averse you are
Attractive maths and proposition, not sure id want the hassle of dealing with this end of the market, but I guess you can outsource it to a letting agency.. LTV of 66% would give you £600k to invest in UK BTL property
Property purchase price on average - £35k for a 2 bedroom ex council flat/house
Total rent: £5k pa
Net rent received - let's say £4k (after insurance, voids, repairs etc...)
£600k would give you 17 properties so net rent = 17 x £4k = £68k per year
Interest only mortgage at 5% of £400k (if wanting to maximise cashflow) = £20k pa
Income = Net rent (68k) - interest (20k) = £48k per year (£4k per month) = 24% Return on invested capital.
Risks:
- House prices fall = so what if you're concentrating on income and can service the debt
- Rents fall = would have to fall a LONG way for you to be in trouble (about 12% net rental yield)
- Interest rates rise = would have to rise by a LOT for you to be in any trouble
- Interest rates rise AND rents fall AND house prices fall = depends how risk averse you are
Edited by zuby84 on Wednesday 5th March 16:04
Which location is this, Glasgow?
If you want Income/Dividend I just wrote the following on another thread.
"Don't comment on these shares much but for me the interesting ones the next 36 months will be the EU property REITS, for those looking for income.
I have some GRN - floated at 1 Euro, currently 1.26 (I bought at 1.13 couldn't get in on IPO) - I'm not sure the shares will increase much but the dividend should be good, probably circ 8% and they are buying (and have bought) Irish property at great prices.
Two in Spain. LAR Espana Socimi and Hispania. These are guiding 10%+ per year between dividend and capital growth. Can never be sure but I fancy decent Spanish commercial property now in Madrid/Barcelona. LAR floated yesterday, Hispania soon. Some of the big players are involved in these. PIMCO/Soros/Paulson etc. Hispania being run by X Goldmans guy.
Another one I am keeping my eye on is KWE (London) - again these will not be get rich quick shares but I think the dividends will be good and I think any property experts buying in Europe at the moment, you cannot go wrong."
Realistically I can see 8-15% pa between dividend and capital growth. Think the Dividend will be a decent proportion of this.
"Don't comment on these shares much but for me the interesting ones the next 36 months will be the EU property REITS, for those looking for income.
I have some GRN - floated at 1 Euro, currently 1.26 (I bought at 1.13 couldn't get in on IPO) - I'm not sure the shares will increase much but the dividend should be good, probably circ 8% and they are buying (and have bought) Irish property at great prices.
Two in Spain. LAR Espana Socimi and Hispania. These are guiding 10%+ per year between dividend and capital growth. Can never be sure but I fancy decent Spanish commercial property now in Madrid/Barcelona. LAR floated yesterday, Hispania soon. Some of the big players are involved in these. PIMCO/Soros/Paulson etc. Hispania being run by X Goldmans guy.
Another one I am keeping my eye on is KWE (London) - again these will not be get rich quick shares but I think the dividends will be good and I think any property experts buying in Europe at the moment, you cannot go wrong."
Realistically I can see 8-15% pa between dividend and capital growth. Think the Dividend will be a decent proportion of this.
Sideways Rich said:
Attractive maths and proposition, not sure id want the hassle of dealing with this end of the market, but I guess you can outsource it to a letting agency..
Which location is this, Glasgow?
He says:Which location is this, Glasgow?
it can be a pain dealing with the feckless (but my staff does that for me.)
Which highlights the big snag. Even if you can achieve those figures you are either learning and deploying all the skills you need yourself to be a slum landlord, or you are paying someone else. But either way that dents the profit margin somewhat.
(Apologies if anyone takes offence at the 'slum landlord' description but that has to be what this is at those price levels, surely)
Siscar said:
He says:
it can be a pain dealing with the feckless (but my staff does that for me.)
Which highlights the big snag. Even if you can achieve those figures you are either learning and deploying all the skills you need yourself to be a slum landlord, or you are paying someone else. But either way that dents the profit margin somewhat.
(Apologies if anyone takes offence at the 'slum landlord' description but that has to be what this is at those price levels, surely)
Should have added I'm a Scot born 10 miles away from Glasgow so wasn't being a snob, just aware you can pick up flats there very cheaply that rent for £3-400 per month. it can be a pain dealing with the feckless (but my staff does that for me.)
Which highlights the big snag. Even if you can achieve those figures you are either learning and deploying all the skills you need yourself to be a slum landlord, or you are paying someone else. But either way that dents the profit margin somewhat.
(Apologies if anyone takes offence at the 'slum landlord' description but that has to be what this is at those price levels, surely)
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