How many £ left in your pocket when you rent a property out?
Discussion
I'm currently looking at buying a city centre flat and most ads on Rightmove tell you how amazing the yield is....
Example
1 bed flat rents for £650/month.
By the time you've added the agency management fee- 10% so call that £65
Income tax
Ground rent/ Service charge= £2,000/year.
What's left of that money? £350ish per month? Is that really worth it for that amount of cash or am I miscalculating it?
Example
1 bed flat rents for £650/month.
By the time you've added the agency management fee- 10% so call that £65
Income tax
Ground rent/ Service charge= £2,000/year.
What's left of that money? £350ish per month? Is that really worth it for that amount of cash or am I miscalculating it?
I'm currently looking at buying a city centre flat and most ads on Rightmove tell you how amazing the yield is....
Example
1 bed flat rents for £650/month.
By the time you've added the agency management fee- 10% so call that £65
Income tax
Ground rent/ Service charge= £2,000/year.
What's left of that money? £350ish per month? Is that really worth it for that amount of cash or am I miscalculating it?
Example
1 bed flat rents for £650/month.
By the time you've added the agency management fee- 10% so call that £65
Income tax
Ground rent/ Service charge= £2,000/year.
What's left of that money? £350ish per month? Is that really worth it for that amount of cash or am I miscalculating it?
You’re not miscalculating it, it’ll be even less if you have to use a mortgage, even at current low rates and before the interest deductibility rules come into force.
Also think about damage, obsolescence and your own cost of capital....
BTL in all but the most exceptional circumstance is, at the moment, one of the worst possible investments to make, especially when capital returns to supplement the income are less than guaranteed.
Also think about damage, obsolescence and your own cost of capital....
BTL in all but the most exceptional circumstance is, at the moment, one of the worst possible investments to make, especially when capital returns to supplement the income are less than guaranteed.
Leicesterdave said:
I'm currently looking at buying a city centre flat and most ads on Rightmove tell you how amazing the yield is....
Example
1 bed flat rents for £650/month.
By the time you've added the agency management fee- 10% so call that £65
Income tax
Ground rent/ Service charge= £2,000/year.
What's left of that money? £350ish per month? Is that really worth it for that amount of cash or am I miscalculating it?
You haven't said how much it is to buy, work out what your ROI is. Example
1 bed flat rents for £650/month.
By the time you've added the agency management fee- 10% so call that £65
Income tax
Ground rent/ Service charge= £2,000/year.
What's left of that money? £350ish per month? Is that really worth it for that amount of cash or am I miscalculating it?
Don't forget agency fees often have VAT on top, however income tax is on the profit after you have taken costs off.
The profits are often not great but on you calculation I personally wouldn't be paying a management company to look after it. I'd also be looking at older flats with much lower ground rents (ideally share of freehold)
The other point is that whilst the costs are likely to remain similar, long term the rental income is likely to increase. I bought my BTL for £100K at the time it rented for £500, that's now increased to £650 (within about 6 years) whilst if anything I think my interest rates have dropped.
The other point is that whilst the costs are likely to remain similar, long term the rental income is likely to increase. I bought my BTL for £100K at the time it rented for £500, that's now increased to £650 (within about 6 years) whilst if anything I think my interest rates have dropped.
Even if you have the property managed, don't forget all the phone calls asking for permission to get repairs made, and trust me there will be issues.
At the moment my tenants are complaining about condensation in the bedroom and want a broken pane of glass in a partially rotten shed replaced. The pane of glass has been broken since before they moved in, knew I should have cut the shed up and dumped it.
Great when you are not getting callsand tge money turns up every month, pain when the tenants are complaining about stuff.
Personally I would not get another BTL property, happier to have the money sitting in a Marcus account paying 1.5% but giving me no hassle.
Also don't forget stamp duty when buying the property, fees and. No doubt 1% to the mortgage broker. Also you are going to lose 50% of the first months rent in fees to the agent.
At the moment my tenants are complaining about condensation in the bedroom and want a broken pane of glass in a partially rotten shed replaced. The pane of glass has been broken since before they moved in, knew I should have cut the shed up and dumped it.
Great when you are not getting callsand tge money turns up every month, pain when the tenants are complaining about stuff.
Personally I would not get another BTL property, happier to have the money sitting in a Marcus account paying 1.5% but giving me no hassle.
Also don't forget stamp duty when buying the property, fees and. No doubt 1% to the mortgage broker. Also you are going to lose 50% of the first months rent in fees to the agent.
Edited by anonymous-user on Monday 26th November 17:45
All I want is to be able to work part time and spend more time with family.
I don't really care about making lots of money- just as well it seems- we just need to be able to get by and get the odd treat here and there.
I've just bought my own property and have £200k left and I've no idea what to do with it- ludicrous!
I don't really care about making lots of money- just as well it seems- we just need to be able to get by and get the odd treat here and there.
I've just bought my own property and have £200k left and I've no idea what to do with it- ludicrous!
Leicesterdave said:
All I want is to be able to work part time and spend more time with family.
I don't really care about making lots of money- just as well it seems- we just need to be able to get by and get the odd treat here and there.
I've just bought my own property and have £200k left and I've no idea what to do with it- ludicrous!
So to be able to work part-time, what do you need to do? How much additional income do you need and for how long?I don't really care about making lots of money- just as well it seems- we just need to be able to get by and get the odd treat here and there.
I've just bought my own property and have £200k left and I've no idea what to do with it- ludicrous!
BTL isnt a get rich quick scheme. I dare say many people over the last 20 years got rich off increasing asset values and leverage rather than rental yields. Once you have a 'critical mass' then no doubt it pays, but for a single property then IMO its not really worthwhile.
If you want exposure to property then you can own property funds, UK or otherwise. ISA or pension would be tax free.
If you want exposure to property then you can own property funds, UK or otherwise. ISA or pension would be tax free.
I own / rent out loads of apartments.
Negotiate hard when purchasing to outweigh Stamp Duty, buy nice places that will rent easily to young Professional tenants, go for low service charge apartments or freehold coach houses.
It's not all doom and gloom out there, just make sure you buy in a decent area and a reasonably new building helps to avoid big and costly problems.
I've done this for a while now, getting around 6-7% net overall, based in the Midlands. Go further South and yield starts to drop off.
Negotiate hard when purchasing to outweigh Stamp Duty, buy nice places that will rent easily to young Professional tenants, go for low service charge apartments or freehold coach houses.
It's not all doom and gloom out there, just make sure you buy in a decent area and a reasonably new building helps to avoid big and costly problems.
I've done this for a while now, getting around 6-7% net overall, based in the Midlands. Go further South and yield starts to drop off.
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