BTL - how does it make money?

[Portia5]

nickfrog said:

If not, you're certainly not an idiot convincing an agent to do all the work for 6%.

In commercial, 5% (+vat) is pretty well a standard fee. In residential it's about negotiation.

If you give an agent a tricky property or a property needing lots of management input then you can expect to pay more than if you give them a well set up property with very little agent input required.

In an agency there will be some properties which are time consuming. But the vast majority will require hardly any input at all. These days even the administrative requirements are handled by IT.

What do you think the owner of a managed property portfolio - especially an overseas owner - actually DOES? What do they 'dedicate their time' to doing for their UK portfolio?

Edited by Portia5 on Friday 14th April 18:14

[98elise]

Portia5 said:

98elise said:

Where are you getting yields like that?

As others have said, it's really not uncommon for many parts of the UK. This one came from Rightmove, which is about as open market as you can get.

Which areas?

I'm not doubting you. I'm selling my low yielding BTL's to get a better return. 10%+ gross yield is great.

[Portia5]

98elise said:

Which areas?

I'm not doubting you. I'm selling my low yielding BTL's to get a better return. 10%+ gross yield is great.

Seriously? You need me to show you 10% yielders?

Okay. 60 seconds on Rightmove I found this:

https://www.rightmove.co.uk/properties/132354767#/...

The LHA rate for a 1 bed in Newcastle is £5117.84p Private market maybe 10% more?

Another 60 seconds found this one in Liverpool:

https://www.rightmove.co.uk/properties/132404066#/...

It even comes with a tenant.

Edited by Portia5 on Friday 14th April 19:04

[NomduJour]

Portia5 said:

Another 60 seconds found this one in Liverpool:

https://www.rightmove.co.uk/properties/132404066#/...

It even comes with a tenant.

£58k plus fees.

[Puzzles]

Portia5 said:

https://www.rightmove.co.uk/properties/132404066#/...

It even comes with a tenant.

Edited by Portia5 on Friday 14th April 19:04

[Portia5]

NomduJour said:

Portia5 said:

Another 60 seconds found this one in Liverpool:

https://www.rightmove.co.uk/properties/132404066#/...

It even comes with a tenant.

£58k plus fees.

Would still easily get 10% yield judging by Rightmove 2-bed rents in Bootle

[R33FAL]

Portia5 said:

Seriously? You need me to show you 10% yielders?

Okay. 60 seconds on Rightmove I found this:

https://www.rightmove.co.uk/properties/132354767#/...

The LHA rate for a 1 bed in Newcastle is £5117.84p Private market maybe 10% more?

Another 60 seconds found this one in Liverpool:

https://www.rightmove.co.uk/properties/132404066#/...

It even comes with a tenant.

Edited by Portia5 on Friday 14th April 19:04

Sounds great until the bit where you have to own an asset in Throckley... where the hell is that... sounds like a proper dump to have flats for £60k

[Portia5]

R33FAL said:

Sounds great until the bit where you have to own an asset in Throckley... where the hell is that... sounds like a proper dump to have flats for £60k

fk knows. Near Newcastle I guess. But with btl it's arithmetics not aesthetics that defines success, so where it is isn't really of any consequence.

[98elise]

Portia5 said:

NomduJour said:

Portia5 said:

Another 60 seconds found this one in Liverpool:

https://www.rightmove.co.uk/properties/132404066#/...

It even comes with a tenant.

£58k plus fees.

Would still easily get 10% yield judging by Rightmove 2-bed rents in Bootle

It's let for £4700, however I don't know the area.

[98elise]

Portia5 said:

98elise said:

Which areas?

I'm not doubting you. I'm selling my low yielding BTL's to get a better return. 10%+ gross yield is great.

Seriously? You need me to show you 10% yielders?

Okay. 60 seconds on Rightmove I found this:

https://www.rightmove.co.uk/properties/132354767#/...

The LHA rate for a 1 bed in Newcastle is £5117.84p Private market maybe 10% more?

Another 60 seconds found this one in Liverpool:

https://www.rightmove.co.uk/properties/132404066#/...

It even comes with a tenant.

Edited by Portia5 on Friday 14th April 19:04

Yes seriously, it was a perfectly respectful question.

The flat has an E EPC so will struggle to meet C (if it ever comes in). You will be limited to what you can do to alter the EPC.

I wouldn't use auction guide prices to judge yield either. It's the cost of purchase that counts.

[ooid]

R33FAL said:

Sounds great until the bit where you have to own an asset in Throckley... where the hell is that... sounds like a proper dump to have flats for £60k

Could be, but again, it all depends on the risk-utility? There are dozens of empty shops & offices on Regent St. currently, perhaps one of the most prestigious areas in the world but few hundreds meters away full of sub-leased or assignments of dodgy american candy-shops with desperate investors.

PS: I have no idea where Throckley is and have not even been in Newcastle for decades!

[Shnozz]

98elise said:

Yes seriously, it was a perfectly respectful question.

The flat has an E EPC so will struggle to meet C (if it ever comes in). You will be limited to what you can do to alter the EPC.

I wouldn't use auction guide prices to judge yield either. It's the cost of purchase that counts.

I just cannot see how this EPC thing will work. There are swathes of leasehold properties that are BTLs that simply wont be able to have any manner to improve the rating.

[Portia5]

Shnozz said:

I just cannot see how this EPC thing will work. There are swathes of leasehold properties that are BTLs that simply wont be able to have any manner to improve the rating.

If it can only achieve the C rating with inordinate expenditure then the owner applies for an exemption. Providing reasonable effort and expenditure has been made to reach the required grade it would be exempted. Doubtless there will be some exceptional cases but doubtless there will be appeal processes as well.

[Shnozz]

Portia5 said:

Shnozz said:

I just cannot see how this EPC thing will work. There are swathes of leasehold properties that are BTLs that simply wont be able to have any manner to improve the rating.

If it can only achieve the C rating with inordinate expenditure then the owner applies for an exemption. Providing reasonable effort and expenditure has been made to reach the required grade it would be exempted. Doubtless there will be some exceptional cases but doubtless there will be appeal processes as well.

As I say though, in the case of leasehold properties, the lack of ownership of the structure, the windows, the roof etc I should imagine would render it impossible to comply even if the owner wanted to?

[98elise]

Shnozz said:

Portia5 said:

Shnozz said:

I just cannot see how this EPC thing will work. There are swathes of leasehold properties that are BTLs that simply wont be able to have any manner to improve the rating.

If it can only achieve the C rating with inordinate expenditure then the owner applies for an exemption. Providing reasonable effort and expenditure has been made to reach the required grade it would be exempted. Doubtless there will be some exceptional cases but doubtless there will be appeal processes as well.

As I say though, in the case of leasehold properties, the lack of ownership of the structure, the windows, the roof etc I should imagine would render it impossible to comply even if the owner wanted to?

Agreed. It's going to be impossible in a lot of cases. The landlords won't be able to do the work in the first place.

I have a few D band properties and the EPC recommends stuff like solar panels and installing floor insulation to get to C. Good luck with that in a leasehold flat!

[LooneyTunes]

98elise said:

Shnozz said:

Portia5 said:

Shnozz said:

I just cannot see how this EPC thing will work. There are swathes of leasehold properties that are BTLs that simply wont be able to have any manner to improve the rating.

If it can only achieve the C rating with inordinate expenditure then the owner applies for an exemption. Providing reasonable effort and expenditure has been made to reach the required grade it would be exempted. Doubtless there will be some exceptional cases but doubtless there will be appeal processes as well.

As I say though, in the case of leasehold properties, the lack of ownership of the structure, the windows, the roof etc I should imagine would render it impossible to comply even if the owner wanted to?

Agreed. It's going to be impossible in a lot of cases. The landlords won't be able to do the work in the first place.

I have a few D band properties and the EPC recommends stuff like solar panels and installing floor insulation to get to C. Good luck with that in a leasehold flat!

What people are also forgetting is that the very high yielding flats are often the dependent on local authority payment rates to generate those returns. It would be trivially easy for councils to scale payments based on EPC’s. 100% for C and above, -x% for D, -y% for E…

[Portia5]

LooneyTunes said:

What people are also forgetting is that the very high yielding flats are often the dependent on local authority payment rates to generate those returns. It would be trivially easy for councils to scale payments based on EPC’s. 100% for C and above, -x% for D, -y% for E…

Two assumptions there.

1) that there's any correlation between high-yield and low EPC (there isn't)

and

2) that there's any problem filling properties with private (non-assisted) tenants paying higher rent than local LHA rates (there isn't)

https://www.belfastlive.co.uk/news/belfast-news/al...

Actually 2) is causing quite the problem (more than usual) for assisted tenants to find tenancies at all. Adding a disincentive to taking them on ain't going to help, is it?

https://www.landlordtoday.co.uk/breaking-news/2022...

Edited by Portia5 on Saturday 15th April 17:26

[LooneyTunes]

I’m aware there is no EPC / yield correlation and didn’t assert that there was.

There’s no disincentive to let to council assisted tenants either, simply a change in market economics: an LA tenant may top up £x, but be incapable of topping up £2x. If private tenants don’t exist LL’s historic (LA supported rents) rents fall or LL’s exit.

Under the approach suggested, LL’s therefore have a choice, accept lower returns for lower EPC or invest to increase EPC and see higher rental income.

Strongly suspect that in some of the yield hotspots, the yields are only achievable due to the LA rates being at the levels they are. Ultimately, I don’t really care as they’re not the markets I’m active in.

[Portia5]

LooneyTunes said:

Strongly suspect that in some of the yield hotspots, the yields are only achievable due to the LA rates being at the levels they are. Ultimately, I don’t really care as they’re not the markets I’m active in.

In reality it's the opposite. Local LHA rates are based on data from local private markets.

Edited by Portia5 on Saturday 15th April 19:41

[LooneyTunes]

Portia5 said:

In reality it's the opposite. Local LHA rates are based on data from local private markets.

You genuinely think that the cheap parts of Newcastle, Glasgow, etc don’t have rents/yields distorted by council money?

The BRMA/30th percentile calcs are quite blunt instruments that give rise to some of these yield opportunities. In some cases the BRMAs cover entire cities or substantial parts of counties, so not exactly local in the sense that some would expect…