Yield - BTL residential investment property

[flyingjase]

Guys

A question for the experienced BTL'ers - what sort of gross rental yield do you target on your BTL properties?

Just about to dip into the market for the first time and I'm looking at this as a long term investment however I'm interested to know what rential yields are achievable / targeted.

Thanks

Jason

[zuby84]

Hey there,

It really just depends on a multitude of factors how much the yield you get for residential properties in this day and age. For instance I'm sure prime London investments obtain nothing more than 4-5%, whereas the properties that we target in Scotland (less prime) have been giving us a yield of approx 10-12% over the past few years with very good occupancy rates; you just have to manage them properly.

So, the decison is if you want big and "safe" or something which is thought to be a little more riskier (ie letting to DHS tenants etc...) Personally; I would take the higher yield properties any day even though it may mean to do miss out on capital appreciation a little bit; but who cares about that?

Cheers

[Black Sport 160]

A couple of mine for comparables:

2 bed 2 bath flat on the riverfront in Gravesend is yielding me approx 5.5%. Not a stella return, but it was a new build in 2004. Lift, underground parking in a modern P/B block, so the return will never be expected to break any records. The rent i'm getting is a tad below market value, however.

2 bedder conversion in Sidcup is giving approx the same, circa 5.5%.

[Simpo Two]

Surely the yield depends massively on whether the property is funded by mortgage or owned outright - what are the figures above based on?

I was thinking of quitting 'normal' investments (because I'm pissed off with them, fund managers, IFAs and glossy brochures while my savings head south) and buying something with the proceeds.

[flyingjase]

Simpo Two said:

Surely the yield depends massively on whether the property is funded by mortgage or owned outright - what are the figures above based on?

I was thinking of quitting 'normal' investments (because I'm pissed off with them, fund managers, IFAs and glossy brochures while my savings head south) and buying something with the proceeds.

#

I'm talking about gross yield (eg before costs). For example you buy a £100k house and rent it for £10k per year = 10% yield. Anyone here that know's better, please correct me if I'm wrong.

The examples given of 5%ish yield just don't work for me. There is currently no capital appreciation (in fact probably the opposite) and mortgage rates are at an all time low, yet BTL rates are still at 5%ish. Therefore nil real return for your investment. Yes I'm thinkng long term but I don't want to be making a loss when interest rates go back up.

The higher risk 12% yield is interesting - more smaller, lower cost investments, spreading the risk and making more short / medium term return, yet as you say without capital growth. When capital growth returns to the market, then you can also invest in the lower yield properties and offset the lower yeild with increasing values.

The only other thing I can think of to improvbe yield is splitting houses into room to room rentals but that seems high maintenance.

At 5% yield minus mortgage interest minus other expenses, I may as well stick the cash in a fixed term investment bond???