Double figure yields on fully sourced and managed properties.

[LongScottSilver]

Have you ever thought about becoming a landlord? History has tells us that property is by far the best asset class to be in. Not only do you get profit on a monthly basis, but there is also capital appreciation to boot. Providing you buy at a discount, in a good area and have a fairly issue free property and tenant (nothing in property is perfect) then you are quids in. I use my investment properties to pay for my stacking. Having been a landlord for 11 years in the good times and the bad, I have learned from my mistakes and many lessons from the mistakes of others.

Like many other property investors I live and breath property. As everyone's funds are finite, I decided a few years back to start helping others do what I do. It allows me to keep buying, refurbing and letting property without having to need the clear funds to do so myself. One of my most recent acquisitions for a client is a 3 bedroom end terrace exLA property. It is valued at £65k and is being purchased at £55k. The mortgage is around £230 a month on a capital repayment over 20 years and the rent is £468 to working tenants. She paid £13,750 for a 25% deposit and £1,000 in mortgage and legal fees. Gas and Electrical checks cost £200 including some small repairs. All in all, it cost her £14,950. She gained £10,000 in instant equity (the difference between the value and cost) and will receive £238 each and every month. That's £2,856 prior to repairs, maintenance, defaults and Tax.

If this client chooses to remortgage in 2 years at 75% Loan to Value (LTV) at it's updated value of £70,000 (2 years of capital appreciation at 4% a year), her new loan would be £52,000. After paying off her old loan of £41,250 she would be receiving around £10,750 cash back from her solicitors at the time. If she was to pool this together with the rental income she has received over the past two years, she would possibly have enough to start the process again.

Imagine having two properties like this earning you a total of almost £500 per month, that's equivalent to 28 x 1oz Kangaroos a month.
 

[KDave]

I like your investment case for the potential positive picture. With respect, may I look at this with some healthy pessimism so we can see the potential negatives 

All in my opinion - There are significant risks with this kind of property investment so lets take the example provided; 5% yield on investment (3K profit vs 55K investment - 20% capital, 80% leverage) is perhaps not enough to offset those risks. On a year where you have a void in letting, need to make major repairs, have a tenant refuses or fails to pay rent (leaving you having to make up the shortfall out of your own pocket), ect, the yield drops, can disappear completely, and your investment becomes a liability. The investment is only possible by using leverage (mortgage) in this example - while that is not necessarily bad, the cost of maintaining this illiquid position could rise (interest rate rises). If you need to liquidate the position because you can no longer maintain it (for whatever reason); there is no guarantee that your sale price will cover the initial investment costs; in worst case scenario it may not cover the mortgage capital, leaving you with a loss of capital and an ongoing liability.

If you paid 55K for a property then that is what it is worth, not what it is listed at, not what next door sold for, ect. You can aim to sell for 65K tomorrow, but given you paid solicitors fees, stamp duty (which I am informed is significant for BTL or second homes), then you will need to achieve a higher price to justify the investment in the first place - in other words, to take a speculative position in an individual property is expensive and the market may not be willing recoup your expenses, nor provide a profit via capital gains in excess of those expenses. If you are going to rent it out, you need to factor in renovation costs (unless the property is already good, or you are a slum landlord of course), and as you mention, insurance and tax. How much is the yield after insurance and tax? How much are the capital gains after buying and selling fees (solicitor, estate agent cut, taxes), renovation costs, ect?

The capital gains in the example do not take into account selling costs, but more importantly, they are paper gains. You need to find a buyer willing to pay 10K more than you paid yesterday, with them normally knowing you paid 10K less yesterday thanks to the internet. In 2 years time there is nothing to guarantee the property will be worth 70K or anything near it. It could be worth 30K thanks to recession, interest rate rises, other reasons for a house price crash ect - negative equity would make remortgaging very difficult and expensive and turn the investment into a liability in terms of capital.

Politically the winds have changed for BTL, especially leveraged BTL in terms of tax on rent, now taxes on the whole rent and not just the profit. Due in part to its illiquid nature, property is a sitting duck for politicians as has been proven by the recent stamp duty changes.

I could go on. I have recently bought a house to live in knowing full well the risks of buying at this point in time - I do not see the house as investment, shelter has always been a liability for me, it was rent before; now the liability is to a bank, but with an end date (25 years away). I have no delusions of making money from the property, though I know that whatever the price does, it will probably be in line with the rest of the market up or down, so it won't matter to me. 

The yield here (after insurance and tax) is comparable to investing in shares in the FTSE 100 without using leverage. More can be achieved from individual companies and investing in stocks is arguably less work and time to achieve, no tenants to manage and the risks to capital historically when diversified are not dissimilar. Once leverage is removed, the picture for BTL gets much better, certainly better than stock market returns, but it needs to be worked out in context - taking into account the recent tax changes and what this signals, the political headwinds against and interest rate policy over the term of the investment, among others. I am personally not investing in stocks at this point in time. 

[vand]

Another dyed in the wool BTLer who thinks that the UK property can continue to outstrip general inflation and wages ad infintum.

The yields you talk about are only available on s^£tholes that nobody would actually want to live in, with high maintenance costs and high probability of voids or problem tenants.

 

[watchesandwhisky]

I do think the whole property market will explode sooner or later, as someone in my 30s a property is an impossibility, will i rent and pay of someone elses mortgage? No..I will buy a motorhome, granted not all have the option to do this..but many my age who are not mortgaged upto the hilt are starting to look at alternatives.

The landlord gravy train wont last for ever.  

 

[Roy]

On 9/26/2017 at 00:23, Madstacks said:

as someone in my 30s a property is an impossibility,

I do love a good documentary, and have a 4k tv that i have not taken advantage of..this is seriously tempting me to get a 4k capable blue ray player for the 4k release. 

Ahh, now I understand 

[watchesandwhisky]

You have to have some luxury's occasionally tho roy! 

I bought the 4k tv about 6 months back - after realizing that for the last 3 years I had not treated myself to anything nice just to enjoy (not for investment)

I wear cheap cloths from sports world/sainsburys, I don't go out down the pub, i don't gamble, my phone is a three year old pay as you go. I DO have the occasional glass of whisky - but strictly to sample my investment stock of course!  

I felt after 3 years of investing pretty much every penny I had into my business and silver/stocks and whisky I should treat myself. 

I'm not one of these types that moans about not being able to afford a house whilst having every expensive item of clothing and new tech at the same time.

 

 

[Roy]

Only teasing mate, you know me 

I still say you're the nicest bloke on the forum 

[watchesandwhisky]

I know mate:P but you have me thinking now..Its a slippery slope treating yourself, I don't want to end up spending my savings on posh cloths and the latest Iphone - or a 2 grand bottle of whisky that I know is far to expensive to enjoy but still eye up anyway ( id never buy, each sip would be playing on my mind lol) 

I dont know about that mate but thank you

[shawy2510]

I know mate:P but you have me thinking now..Its a slippery slope treating yourself, I don't want to end up spending my savings on posh cloths and the latest Iphone - or a 2 grand bottle of whisky that I know is far to expensive to enjoy but still eye up anyway[emoji3] ( id never buy, each sip would be playing on my mind lol) 
I dont know about that mate but thank you[emoji38]

You only live once mate, treat yourself now & again saving is good but what if you don't get to that age to enjoy it.

I am 27 virtually 28, I have a small terraced house & treat myself occasionally aswel as a couple holidays a year & a new car every 3 years....only Vauxhalls but hey ho its good enough for me, compared to alot on here that is pocket change but for me at the time in my life is all I need. Once I take on more work then we shall see what the future holds.

[Roy]

Nothing wrong with treating yourself. I'm trying to paraphrase something Robert Kiyosaki said (without being pretentious)

'If I want a Lamborghini, I can have one....but I have to make the money first" (i read it moons ago)

If you've earnt it, enjoy it but remember it's disposable and you'll have to earn even more to replace/upgrade it! lol

'saving is good but what if you don't get to that age to enjoy it'

As me old mate @SilverPirate used to say, 'don't end up the richest man in the graveyard'

 

[kimchi]

20 minutes ago, Roy said:

Only teasing mate, you know me 

I still say you're the nicest bloke on the forum 

@Madstacks don't listen to @Roy - he says the same thing to all the hunky fellas on the forum

Beware his fridge - if he starts talking about that know that he has you firmly in his sights

[watchesandwhisky]

6 minutes ago, shawy2510 said:

You only live once mate, treat yourself now & again saving is good but what if you don't get to that age to enjoy it.

I am 27 virtually 28, I have a small terraced house & treat myself occasionally aswel as a couple holidays a year & a new car every 3 years....only Vauxhalls but hey ho its good enough for me, compared to alot on here that is pocket change but for me at the time in my life is all I need. Once I take on more work then we shall see what the future holds.

That's very true mate and sounds like you have things nicely sorted, and it is impossible to know where life will lead really. I am going to be strict because me and my partner are saving for what will be a luxury to many but will be a home to us...

 

Then can wake up to views like this ... I do draw the line at a wigwam though...

1 minute ago, kimchi said:

@Madstacks don't listen to @Roy - he says the same thing to all the hunky fellas on the forum

Beware his fridge - if he starts talking about that know that he has you firmly in his sights

LOL whats with the fridge?? 

[Roy]

@Madstacks you have a head start, you live in the best county in the country 

[kimchi]

11 minutes ago, Madstacks said:

That's very true mate and sounds like you have things nicely sorted, and it is impossible to know where life will lead really. I am going to be strict because me and my partner are saving for what will be a luxury to many but will be a home to us...

 

Then can wake up to views like this ... I do draw the line at a wigwam though...

LOL whats with the fridge?? 

Looks amazing! I've been seriously considering something very similar but I have problems reversing a Golf

I like the wigwam, or is it a teepee (I remember some huge proto-political correctness nonsense about that at school in the 80s)? I have much more of an issue with the teddy bear on the bed!

You'll find out about @Roy's fridge soon enough at this rate I reckon

[watchesandwhisky]

3 minutes ago, Roy said:

@Madstacks you have a head start, you live in the best county in the country 

Dorset is indeed beautiful:) It will always be my home. 

Maybe I can setup a silver forum express overnight courier service though

[Roy]

Sadly, I look like a 3rd year student 

[watchesandwhisky]

3 minutes ago, kimchi said:

Looks amazing! I've been seriously considering something very similar but I have problems reversing a Golf

I like the wigwam, or is it a teepee (I remember some huge proto-political correctness nonsense about that at school) I have much more of an issue with the teddy bear on the bed!

You'll find out about @Roy's fridge soon enough at this rate I reckon

They do look really good! visited loads of dealers, there bloody expensive for what they are though...many come with reversing cameras instead of a central mirror:)

 

[watchesandwhisky]

Just now, Roy said:

Sadly, I look like a 3rd year student 

Thats the first time I have seen an case in a fridge!:D

[Roy]

@Madstacks have you heard of tiny homes?

I'll find you a link

[watchesandwhisky]

3 minutes ago, Roy said:

@Madstacks have you heard of tiny homes?

I'll find you a link

Nope never heard of mate, but am interested to see! 

[Roy]

Tiny House Living Ideas For Building and Living Well In Less than 400 Square Feet - Ryan Mitchell.pdf.zip

There's so much talent your way. Caravan/lodge/static/boat builders. I'd love to do this.

[kimchi]

19 minutes ago, Madstacks said:

They do look really good! visited loads of dealers, there bloody expensive for what they are though...many come with reversing cameras instead of a central mirror:)

 

A reverse cam would be essential for any half-competent driver I think, I'd need a full-time reversing crew alas

18 minutes ago, Roy said:

@Madstacks have you heard of tiny homes?

I'll find you a link

You sly barsteward you, you've already shown him the case in the fridge, classic misdirection!

@Madstacks beware the case mate, beware!!! If you've seen Pulp Fiction it's Marcellus Wallace's soul in there x 10

[watchesandwhisky]

Cheers for that Link Roy, Will have a proper read of that! did just quickly flick through and look at the pics and its ingenious what can be created in limited space. 

I guess the main problem in the UK is land price (or planning permission on cheap land) , but it would seem that modular/flatpack/pre fab houses might be the future somewhere along the line at the rate we are going!

[Xander]

42 minutes ago, Roy said:

Nothing wrong with treating yourself. I'm trying to paraphrase something Robert Kiyosaki said (without being pretentious)

'If I want a Lamborghini, I can have one....but I have to make the money first" (i read it moons ago)

If you've earnt it, enjoy it but remember it's disposable and you'll have to earn even more to replace/upgrade it! lol

'saving is good but what if you don't get to that age to enjoy it'

As me old mate @SilverPirate used to say, 'don't end up the richest man in the graveyard'

 

The richest man in the graveyard is the gravedigger.

[Roy]

Technically, yes....but I've known folk from the traveling community be buried with their gold and one guy in his 60's Ford Zodiac