Is there money to be made in 2nd/3rd properties?

[NickCQ]

chinnyman said:

Aren't some of the calculations in this thread a little incorrect.
Rental yield of the property price may be low but if you look at the yield from what you ah e actually paid...

I disagree on that one. Looking at today's yield versus a historical cost basis is the wrong way to compare assets.

Simply put - you could sell at today's market value and buy something else, so when evaluating buy versus hold you need to use today's value (net of transaction costs). Capital growth has already happened, it's "income" from prior periods that just hasn't been crystallised as of yet.

[fishseller]

The way I see it is if you have 300K in cash go buy 2 properties or 1 good one seek 1.5 to 2.5 K monthly rental combined get landlord insurance and sit back and relax no BTL mortgage no complications split the rent with you and your partner minimize tax liability, a lot of folk want to have loads of properties loads of debt loads of hassle and probably return less.

Or done BTL 20 to 30 years ago then your sitting pretty

[fishseller]

Groat said:

rockin said:

Tell that to the people with £1m+ in ISAs which they can leave compounding tax free or access tax free whenever they like.

....which took them 25+ years to accumulate without providing them a ha'penny in spending money to enjoy

Ever met a happy miser?

Yep know many Happy millionaires' that done without the massive deprecation cars and expensive nights out whilst the spenders lived it up getting pissed on overprice wine and very expensive food and mortgaged up to the hilt interest only too keep up with the jones's now the tables have turned the keepy uppies are skint Mr. miser is living the dream.

[98elise]

chinnyman said:

I'm a pension person myself due to tax.

I do have one BTL.

Aren't some of the calculations in this thread a little incorrect.
Rental yield of the property price may be low but if you look at the yield from what you ah e actually paid...

It depends how you view it. My properties yield 7% of their original purchase prices. As they were mortgaged it was more like 14% return on investment. 10 years later the properties have doubled in value so I've had 10 years of income + 400% gain on my original investment. The income pays all my bills.

I've also invested in ISA's and pensions which are doing very well, however they are much more volatile, and I'm not prepared to gear those investments.

For the future I'm slowly getting out of BTL, but will reinvested that in other property.

[MechMovement]

98elise said:

It depends how you view it. My properties yield 7% of their original purchase prices. As they were mortgaged it was more like 14% return on investment. 10 years later the properties have doubled in value so I've had 10 years of income + 400% gain on my original investment. The income pays all my bills.

I've also invested in ISA's and pensions which are doing very well, however they are much more volatile, and I'm not prepared to gear those investments.

For the future I'm slowly getting out of BTL, but will reinvested that in other property.

When you say reinvested in other property do you mean another type of property (commercial, FHL) or "levelling up" your existing residential BTL?

I've often wondered how existing BTL business owners make decisions on their exit strategies.

[anonymous-user]

MechMovement said:

When you say reinvested in other property do you mean another type of property (commercial, FHL) or "levelling up" your existing residential BTL?

I've often wondered how existing BTL business owners make decisions on their exit strategies.

Especially when it comes to paying capital gains tax. The house next door is a rental and is now up for sale. They bought it in 2006 and since then it has pretty much doubled in value. Using a capital gains calculator and a few assumptions it looks like they will need to pay around £50K in capital gains.

[NickCQ]

Joey Deacon said:

Especially when it comes to paying capital gains tax. The house next door is a rental and is now up for sale. They bought it in 2006 and since then it has pretty much doubled in value. Using a capital gains calculator and a few assumptions it looks like they will need to pay around £50K in capital gains.

Sure, but you'd pay a lot more than 28% on £180k of wage income.

[98elise]

MechMovement said:

98elise said:

It depends how you view it. My properties yield 7% of their original purchase prices. As they were mortgaged it was more like 14% return on investment. 10 years later the properties have doubled in value so I've had 10 years of income + 400% gain on my original investment. The income pays all my bills.

I've also invested in ISA's and pensions which are doing very well, however they are much more volatile, and I'm not prepared to gear those investments.

For the future I'm slowly getting out of BTL, but will reinvested that in other property.

When you say reinvested in other property do you mean another type of property (commercial, FHL) or "levelling up" your existing residential BTL?

I've often wondered how existing BTL business owners make decisions on their exit strategies.

Residential BTL is being attacked by both main political parties. In particular Labour have some very hard hitting policies like making the landlord fund right to buy.

I'm looking at holiday letting (especially abroad), HMO and student let's, plus I have my eye on a commercial unit to do self storage.

[Groat]

fishseller said:

Yep know many Happy millionaires' that done without the massive deprecation cars and expensive nights out whilst the spenders lived it up getting pissed on overprice wine and very expensive food and mortgaged up to the hilt interest only too keep up with the jones's now the tables have turned the keepy uppies are skint Mr. miser is living the dream.

I'll see your Aesop and raise you an Epicurus

(btw, what happened to 'the spenders' rents? Did they suddenly stop rather than progressively rising at an above inflationary rate whilst capital gain deflated their debt?)

[Pit Pony]

The answer to the OPs question is Yes.
If the owner is a basic rate tax payer, and you use a buy to let mortgage and pick the right house and manage it yourself and are not unlucky.
You will make a profit and pay tax and the house might go up in value and when you sell it you will pay capital gains tax.

We rent out a house which has made £6k a year in value and £5k profit after interest. All for an investment of £35k six years ago.
My wife woukd happily have left Irvin an ISA


To get that, we've managed it ourselves used open rent to advertise and reference.

I've probably put 20 days full time into it. Decorating, viewings, admin, maintenance.

We have another house I'm thinking about the whole holiday let thing. Mainly because I want to use it when it's not rented out, but have someone else pay for it. Problem is the distance from me.

I started a post yesterday but no replies as yet.

https://www.pistonheads.com/gassing/topic.asp?h=0&...

[Pit Pony]

When it comes to yeild or return on investment.
I look at it like this. 2 ways.

What is my profit compared to the original investment. ?
5.5/35 = 16%

What is the profit compared to the current equity (minus selling cost)
5.5/80 = 7%

The top % goes up gradually but the bottom % reduces along with the risk.

[NickCQ]

Pit Pony said:

The top % goes up gradually but the bottom % reduces along with the risk.

How does the risk reduce? You have the same underlying process of attracting and retaining tenants as well as the fluctuations in capital and rental value. Lots of "sunk cost fallacy" on display in this thread.

[Pit Pony]

NickCQ said:

Pit Pony said:

The top % goes up gradually but the bottom % reduces along with the risk.

How does the risk reduce? You have the same underlying process of attracting and retaining tenants as well as the fluctuations in capital and rental value. Lots of "sunk cost fallacy" on display in this thread.

The value (whilst fluctuating wildly) will increase over time.

In our case we are using the rent to reduce the morgage debt. The way i see itnThe less we owe, the smaller the %age of morgage to value, The less we are likely to be impacted by interest rate fluctuations, and more able to pay it if we get rouge tenants.
The risk of getting rouge tenants is probably lower the more experience you get. We were lucky with the first tenants. They needed a guarantor, and whilst we never needed to test that particular legal minefield, they split up and the woman struggled financially. She never missed a payment, but when she left, to take up a housing association offer, some £200 a month less, she told me how difficult it had been. Glad I didn't put the rent up.
Since then, I'd only take couples if either one of them can afford the rent. And won't take anyone that needs a guarantor. And look for public sector employment. Social workers, police, nurses, ect

[NickCQ]

Pit Pony said:

• using the rent to reduce the morgage debt
• risk of getting rogue tenants is lower the more experience you get

Ah OK, good points - had not considered these but yes if you pay down debt and get better at managing your risk does reduce.
There was a good quote from Keynes in John Authers' Bloomberg newsletter this morning:

Keynes said:

One must not allow one’s attitude to securities which have a daily market quotation to be disturbed by this fact or lose one’s sense of proportion. Some Bursars will buy without a tremor unquoted and unmarketable investments in real estate which, if they had a selling quotation for immediate cash available at each Audit, would turn their hair gray. The fact that you do not know how much its ready money quotation fluctuates does not, as is commonly supposed, make an investment a safe one.