Buy to let and rental amounts

[GT03ROB]

nct001 said:

People just don't get it do they?

I'd take the ten per cent compounded capital growth that is £200,000 capital gain on the average joe three bed house in Oxford - who cares about £7200 rental income from the £40k house - interest will wipe that down to £5k then wear and tear and you are left with £4500.

Meanwhile if you had five places in Oxford you would be a millionaire from the capital gain.

And to put it into perspective a £250k house nine years ago would have only needed a £35k deposit so could have invested £150k and had a million pound capital growth in under ten years.


The yield on a property reflects the capital growth and the state of the local market.

I think people do get it. This is the reason the government has launched it's "crackdown" on "BTL" landlords.

They are really trying to stop the speculative punter who sees the rent as covering the costs of his speculative punt, not the true landlord who looks to make the money on the rent with any capital appreciation a bonus.

[TheLordJohn]

GT03ROB said:

Not the true landlord who looks to make the money on the rent with any capital appreciation a bonus.

Exactly! It's all about cash flow.

[nct001]

GT03ROB said:

nct001 said:

People just don't get it do they?

I'd take the ten per cent compounded capital growth that is £200,000 capital gain on the average joe three bed house in Oxford - who cares about £7200 rental income from the £40k house - interest will wipe that down to £5k then wear and tear and you are left with £4500.

Meanwhile if you had five places in Oxford you would be a millionaire from the capital gain.

And to put it into perspective a £250k house nine years ago would have only needed a £35k deposit so could have invested £150k and had a million pound capital growth in under ten years.


The yield on a property reflects the capital growth and the state of the local market.

I think people do get it. This is the reason the government has launched it's "crackdown" on "BTL" landlords.

They are really trying to stop the speculative punter who sees the rent as covering the costs of his speculative punt, not the true landlord who looks to make the money on the rent with any capital appreciation a bonus.

You either get yield or growth
Never try to beat the market in the long term you will lose


There is nothing wrong with buying property in SE where yields are low as a property investment.

The reason houses mentioned above have high yields is because of the market i.e. May be

Low demand from owner occupiers (highlighted by previous poster)
Social deprivation
Low long term capital growth
Isolated transport and job links
Area of low skilled employment
High proportion of available / empty housing

And more

All these reasons explain why yields are higher. The market is having to attract investors by offering high rental yields to offset the negative factors.

Yields are low in Oxford and SE because of the potential employment benefits etc etc with great potential benefits for those who live there.

Never try to beat the market - the housing market is like any other market it is priced according to the area for good reason.


You could argue that being a landlord in SE is doing a good service to area as the yields are low to allowing great value for money to tenants ie live in this £350k house for £1000 a month whereas you could live in a £120k house for £1000 a month in some areas - especially in Midlands some land lords are chancing their arms.

[GT03ROB]

nct001 said:

You either get yield or growth
Never try to beat the market in the long term you will lose


There is nothing wrong with buying property in SE where yields are low as a property investment.

The reason houses mentioned above have high yields is because of the market i.e. May be

Low demand from owner occupiers (highlighted by previous poster)
Social deprivation
Low long term capital growth
Isolated transport and job links
Area of low skilled employment
High proportion of available / empty housing

And more

All these reasons explain why yields are higher. The market is having to attract investors by offering high rental yields to offset the negative factors.

Yields are low in Oxford and SE because of the potential employment benefits etc etc with great potential benefits for those who live there.

Never try to beat the market - the housing market is like any other market it is priced according to the area for good reason.


You could argue that being a landlord in SE is doing a good service to area as the yields are low to allowing great value for money to tenants ie live in this £350k house for £1000 a month whereas you could live in a £120k house for £1000 a month in some areas - especially in Midlands some land lords are chancing their arms.

I agree & I'm not judging whether either is right or wrong. Just that the two options are very different. People need to be honest with themselves about being property speculators or landlords & recognize the risk of each are very different. I believe we are storing up problems through too many people convincing themselves they are landlords when in reality they are property speculators.

[TheLordJohn]

GT03ROB said:

I agree & I'm not judging whether either is right or wrong. Just that the two options are very different. People need to be honest with themselves about being property speculators or landlords & recognize the risk of each are very different. I believe we are storing up problems through too many people convincing themselves they are landlords when in reality they are property speculators.

Couldn't have put it better myself. If you're purchasing property and betting on the market going up (10% a year average, or whatever they quote) you're simply a gambler. Nothing more, nothing less.

[98elise]

TheLordJohn said:

GT03ROB said:

I agree & I'm not judging whether either is right or wrong. Just that the two options are very different. People need to be honest with themselves about being property speculators or landlords & recognize the risk of each are very different. I believe we are storing up problems through too many people convincing themselves they are landlords when in reality they are property speculators.

Couldn't have put it better myself. If you're purchasing property and betting on the market going up (10% a year average, or whatever they quote) you're simply a gambler. Nothing more, nothing less.

Agreed. I'm a landlord and I won't buy a property unless the rental figures stack up. The capital gain doesn't figure as I'm not buying to flip a few years later. I'm currently sitting on a reasonable capital gain, however this is part of my retirement plan so it doesn't really matter what they are worth on paper. If house priced dropped by 30% tomorrow it would make no difference to me as a landlord.

[SunsetZed]

TheLordJohn said:

GT03ROB said:

I agree & I'm not judging whether either is right or wrong. Just that the two options are very different. People need to be honest with themselves about being property speculators or landlords & recognize the risk of each are very different. I believe we are storing up problems through too many people convincing themselves they are landlords when in reality they are property speculators.

Couldn't have put it better myself. If you're purchasing property and betting on the market going up (10% a year average, or whatever they quote) you're simply a gambler. Nothing more, nothing less.

I don't disagree with what you guys are saying but I think that's it's less clear cut because the interest rates have been stuck where they are for 7 years now with no sign of serious increase which has turned / are turning speculators into landlords. People may have bought planning to flip but the interest rates have for some made the rental number work and the continued capital appreciation gives them little incentive to sell properties that are still increasing in value.

[nct001]

As we agreed that one invests either for yield or capital growth.

It's unfair to say that investors with low yields are speculative as valuations of properties in areas of low yield tend to be owner occupied based locations and tend to fluctuate in value far less in times of recession.

Surely aiming for a particularly high yield above the median figure could be seen as speculative?

Often very high yields are not up scaleable as the costs associated to their ownership mount up. And in the longer term new market entrants / awareness might cause that very high yield to drop down.