Phil Posted August 9, 2006 Report Share Posted August 9, 2006 Hi all I have read many questions and replies on this forum and think it is great to have such a facility for landlords and tenants alike to get advice. I am considering investing in 1 or 2 buy to let properties and would greatly appreciate some advice on a question I have. I am finding the yields available are quite low as prices across the UK have risen considerably and rentaals remain relatively low. Eg buy to let properties (2-3 bedroom terrace or semi) in my area seem to be around £140K, with rental yields of around £480-£500 pcm. I think this gives to a yield of around 3.5%. Cap growth seems to be around 6% but obviously cannot be guaranteed. Do these figures stack up for a long term investment ? Thanks Phil Link to comment Share on other sites More sharing options...
Trenners Posted August 9, 2006 Report Share Posted August 9, 2006 Hi Phil, Phil and Kirstie (Location, Location, Location) advise that you should invest if the yield is 5% or more. The logic behind this advice is that the rental income should be broadly covering the mortgage interest. If you achieve 5% yield then the only risk is that the property is empty (rather than let) and all the capital growth (even 3% a year delivers 100% capital growth over 20 years) is free. So, if you can get the rent to cover the mortgage and you choose a location that has a plentiful supply of tenants - there is never a bad time to invest as long as you are looking at this over the long term - 20 years or so ..... Good luck, Mark Link to comment Share on other sites More sharing options...
Phil Posted August 9, 2006 Author Report Share Posted August 9, 2006 Mark Thanks for the advice. In terms of getting to the 5% target, I seem to be struggling. I live in Leicester and most 3 bed semi's or terrace seem to be renting at upto £500pcm, costing 140K. Do you have any tips how I can achieve 5%. Is there something I am missing ? Phil Link to comment Share on other sites More sharing options...
Trenners Posted August 9, 2006 Report Share Posted August 9, 2006 Hi Phil I guess the only way to hit the 5% target in the Leicester market is to increase the initial deposit. If you could put £20,000 deposit down then your mortgage would be £120,000 (based on the house prices and rent you discuss). £500/month rent would generate £6,000 per annum which is a yield of 5%. Another important factor is reducing on-going costs by trying to find tenants yourself (rather than giving a percentage of your profits to a letting agent). Are you sure you are only able to get £500/month back for a £140,000 investment? If so, perhaps Leicester is not the best home for your money and you should seek other areas with a better yield. Mark Link to comment Share on other sites More sharing options...
Adam Posted August 9, 2006 Report Share Posted August 9, 2006 Hi Phil,a couple of options maybe to look at purchasing up north,where house prices are lower(in some areas) or look at buying a property that you can rent out as seperate rooms that way you can maximise your roi.Beware though that there's a lot more regs. with h.m.o's.Good luck Adam Link to comment Share on other sites More sharing options...
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