BTL - how does it make money?
Discussion
nikaiyo2 said:
I looked at a couple of potential new BTLs at the weekend.
There is literally no sense at all, I recon it would take about 3 years to repay the SDLT, assuming no voids or extra expenses.
Why bother ?
In the areas I know you'll make a loss but the landlords are banking on capital growth and future rental increases.There is literally no sense at all, I recon it would take about 3 years to repay the SDLT, assuming no voids or extra expenses.
Why bother ?
nikaiyo2 said:
I looked at a couple of potential new BTLs at the weekend.
There is literally no sense at all, I recon it would take about 3 years to repay the SDLT, assuming no voids or extra expenses.
Why bother ?
Three years? I work on the basis that a new property makes me no money in year one, in which time it's paying off SDLT and legal fees (and probably leaving a surplus that covers some initial freshening up). There is literally no sense at all, I recon it would take about 3 years to repay the SDLT, assuming no voids or extra expenses.
Why bother ?
As for why bother, a regular return that's not directly correlated to the equity markets combined with a degree of inbuilt indexation/inflation protection can be attractive if you're looking at long-term investment.
Just looking into this - purchase price of 100k, monthly rental of £700, full service letting agent asking for 10%, mortgage is 250.
So approx 300 nett, not great but im expecting a big price rise over the next 5 years.
I can afford 2, possibly 3.
Just something I have never done before, will also need to set up a ltd as we are both higher rate payers already
So approx 300 nett, not great but im expecting a big price rise over the next 5 years.
I can afford 2, possibly 3.
Just something I have never done before, will also need to set up a ltd as we are both higher rate payers already
Puzzles said:
thats a very good yield, is that an area where you'd need to factor in a refurb every tenancy?
The area isn’t amazing, but housing starts from £60k - so for 80-100 I am looking in the nicer areas. There is also major money sidelined over the next 3-10years for massive redevelopment so possible future option of converting to holiday let.
I imagine refurbs will be required, but I own a building/joinery firm so can do everything in house very quickly so I’m not worried that way.
LooneyTunes said:
Three years? I work on the basis that a new property makes me no money in year one, in which time it's paying off SDLT and legal fees (and probably leaving a surplus that covers some initial freshening up).
As for why bother, a regular return that's not directly correlated to the equity markets combined with a degree of inbuilt indexation/inflation protection can be attractive if you're looking at long-term investment.
That has always been my assumption, 12 months rent will cover costs of purchase...As for why bother, a regular return that's not directly correlated to the equity markets combined with a degree of inbuilt indexation/inflation protection can be attractive if you're looking at long-term investment.
I used the numbers spread sheet on my ipad over the bank holiday as I could not get excel to work at home... and managed to add /2 into my formula :P so its only 18 months lol
Blakeatron said:
The area isn’t amazing, but housing starts from £60k - so for 80-100 I am looking in the nicer areas.
There is also major money sidelined over the next 3-10years for massive redevelopment so possible future option of converting to holiday let.
I imagine refurbs will be required, but I own a building/joinery firm so can do everything in house very quickly so I’m not worried that way.
Would you be prepared to share the location ?There is also major money sidelined over the next 3-10years for massive redevelopment so possible future option of converting to holiday let.
I imagine refurbs will be required, but I own a building/joinery firm so can do everything in house very quickly so I’m not worried that way.
nikaiyo2 said:
LooneyTunes said:
Three years? I work on the basis that a new property makes me no money in year one, in which time it's paying off SDLT and legal fees (and probably leaving a surplus that covers some initial freshening up).
As for why bother, a regular return that's not directly correlated to the equity markets combined with a degree of inbuilt indexation/inflation protection can be attractive if you're looking at long-term investment.
That has always been my assumption, 12 months rent will cover costs of purchase...As for why bother, a regular return that's not directly correlated to the equity markets combined with a degree of inbuilt indexation/inflation protection can be attractive if you're looking at long-term investment.
I used the numbers spread sheet on my ipad over the bank holiday as I could not get excel to work at home... and managed to add /2 into my formula :P so its only 18 months lol
Blakeatron said:
The area isn’t amazing, but housing starts from £60k - so for 80-100 I am looking in the nicer areas.
There is also major money sidelined over the next 3-10years for massive redevelopment so possible future option of converting to holiday let.
I imagine refurbs will be required, but I own a building/joinery firm so can do everything in house very quickly so I’m not worried that way.
Would you be prepared to share the location ?There is also major money sidelined over the next 3-10years for massive redevelopment so possible future option of converting to holiday let.
I imagine refurbs will be required, but I own a building/joinery firm so can do everything in house very quickly so I’m not worried that way.
Portia5 said:
Just made highest offer (£51250) on 1 bed flat which will cost £55k inc legals and ADS etc.
My agent advising rent should be £550pcm although £650 could be possible.
My agent advising rent should be £550pcm although £650 could be possible.
Sounds like a solid gross yield.
Minus tax, minus agent fees if any, minus unoccupied periods, minus CGT, minus maintenance/repairs, minus ground rent, insurance, leasehold shared costs if any, minus your time, etc etc
What's the projected net yield?
nickfrog said:
Sounds like a solid gross yield.
Minus tax, minus agent fees if any, minus unoccupied periods, minus CGT, minus maintenance/repairs, minus ground rent, insurance, leasehold shared costs if any, minus your time, etc etc
What's the projected net yield?
Insurance £150pa via HA
Ground rent N/A
CGT. Why would there be CGT?
Unoccupied periods : Virtually zero
My time: You mean the 15 mins speaking to agents and solicitor? Don't think HMRC would swallow that one
Letting agent? 6% inc vat
Building management (local HA): £600pa including BI
Maintenance/repairs? could be anything. From pics I'd say very little.
Guess net relevant (pre-tax): £5- 5.5k.
Portia5 said:
nickfrog said:
Sounds like a solid gross yield.
Minus tax, minus agent fees if any, minus unoccupied periods, minus CGT, minus maintenance/repairs, minus ground rent, insurance, leasehold shared costs if any, minus your time, etc etc
What's the projected net yield?
Insurance £150pa via HA
Ground rent N/A
CGT. Why would there be CGT?
Unoccupied periods : Virtually zero
My time: You mean the 15 mins speaking to agents and solicitor? Don't think HMRC would swallow that one
Letting agent? 6% inc vat
Building management (local HA): £600pa including BI
Maintenance/repairs? could be anything. From pics I'd say very little.
Guess net relevant (pre-tax): £5- 5.5k.
I guess if you know you're never going to sell then yes no CGT. Unless of course there is no gain which is also a possibility.
I find that all property require maintenance and repair if they are kept for a long time
nickfrog said:
But still that sounds like 5.5% to 6% net after 40% tax. Not bad but not particularly appealing unless one has exhausted yearly pension tax relief and ISA allowances.
Funny you should mention that. I stuck £20k in an IM ISA in Sept.21. It's produced zero income for me and is worth £20352.At the same time (09/21) the wife stuck £20k in a Vanguard ISA. It's done slightly better. Zero income and worth £20675.
That's a grand out of 40 in 18 months.
Our premium bonds have done better.
Portia5 said:
Funny you should mention that. I stuck £20k in an IM ISA in Sept.21. It's produced zero income for me and is worth £20352.
At the same time (09/21) the wife stuck £20k in a Vanguard ISA. It's done slightly better. Zero income and worth £20675.
That's a grand out of 40 in 18 months.
Our premium bonds have done better.
Sure. Mine have done a little better than that over that period but not much. Overall BTL for us over the past 12 years couldn't match investments particularly as the brunt of it came with a 40% HMRC uplift. But we never found an agent doing all the work for 6% nor properties that didn't require maintenance or the buildings not needing repairs nor could avoid CGT. At the same time (09/21) the wife stuck £20k in a Vanguard ISA. It's done slightly better. Zero income and worth £20675.
That's a grand out of 40 in 18 months.
Our premium bonds have done better.
But if you can get all that while not doing any work towards your portfolio then all credit to you!
nickfrog said:
Sure. Mine have done a little better than that over that period but not much. Overall BTL for us over the past 12 years couldn't match investments particularly as the brunt of it came with a 40% HMRC uplift. But we never found an agent doing all the work for 6% nor properties that didn't require maintenance or the buildings not needing repairs nor could avoid CGT.
But if you can get all that while not doing any work towards your portfolio then all credit to you!
Well people who CAN'T make it pay exit the market, don't they? To all accounts there don't seem to be very many of them, and it seems their properties are mostly being bought by other landlords.But if you can get all that while not doing any work towards your portfolio then all credit to you!
Maybe we're all just idiots!
Portia5 said:
Well people who CAN'T make it pay exit the market, don't they? To all accounts there don't seem to be very many of them, and it seems their properties are mostly being bought by other landlords.
Maybe we're all just idiots!
No we could make it. Just didn't make much sense against other investments, particularly fiscally, as your latest example highlights. But it was good for diversification once all other fiscally efficient avenues were exhausted. Maybe we're all just idiots!
On the other hand it would seem that other landlords are not buying as there is a scarcity of rentals, at least in London. Which ironically pushes rent up so not too bad for surviving LL.
But as I said, if you don't have to dedicate any time to it, it's pretty good although I remember you saying you have to run it as a business (maybe it was someone else) which implies that you do have to dedicate some time to it over the 15mn needed for that latest transaction.
If not, you're certainly not an idiot convincing an agent to do all the work for 6%.
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