Buy to lets

[southgate]

Im guessing most would advise to steer clear of buy-to-lets at the moment due to the state of the property market...

But is there a general formula to calculate if your potential buy to let is a goodun or not? Obviously using mortgage repayments V rental income.

There's a 2 bed house down my road that seems competitively priced...
I guess the chance is it may not look competitively priced in a few years time?

[Sarnie]

Find out what similar properties on the same road or within the local vicinity rent for.

Find out what you can get it for and then minus 25%, this will give you what level of mortgage you will need.

Find out what the payments on the mortgage on repayment would be.

If the rent is at least 125% of the mortgage payment then it's potentially a viable investment, assuming you have the 25% deposit required and can let it all year round or afford to pay the mortgage should you not be able to.

[anonymous-user]

9% yield and absolute max of 70% LTV is my rule of thumb

[Webber3]

JPJPJP said:

9% yield and absolute max of 70% LTV is my rule of thumb

9% yield! What part of the country would that be?

[NoelWatson]

Webber3 said:

JPJPJP said:

9% yield! What part of the country would that be?

Most of it around 2000?

[Kickstart]

In the cheaper parts of the NW 8% is fairly typical at the moment - the only difficulty is that capital appreciation even in a strong market is not likely to be that clever in the typical 2 up/down terrace in the cheaper areas.

[anonymous-user]

Webber3 said:

JPJPJP said:

9% yield and absolute max of 70% LTV is my rule of thumb

9% yield! What part of the country would that be?

None that I have seen since 2005 has met my buying criteria so I haven't bought, but I expect that will change in due course

I have Tunbridge Wells and York as the main concentrations for now

[southgate]

JPJPJP said:

Webber3 said:

JPJPJP said:

9% yield and absolute max of 70% LTV is my rule of thumb

9% yield! What part of the country would that be?

None that I have seen since 2005 has met my buying criteria so I haven't bought, but I expect that will change in due course

I have Tunbridge Wells and York as the main concentrations for now

You get around a bit then. No rule about keeping properties close to where you live?

Think I'll wait for the market to pick up for now

[anonymous-user]

NoelWatson said:

Webber3 said:

JPJPJP said:

9% yield! What part of the country would that be?

Most of it around 2000?

bought first one in April 1996 and not bought any since August 2004. Never stopped looking yet...

[groak]

If you know how to buy, 9%(gross) is nothing special at all. In fact, given the likelihood of rate rises, it's poor.

[Wings]

I believe it was Tonker who posted on another thread, that at this point in time there is no money to be made from BTLs. This i also believe, with recent examples of tenants rental arrears, tenants leaving to down size, so empty rental properties, council tax payments for the same, repairs and contractors being paid for the same.

So unless one presently buys a property well under market price, a good letting market and little or no mortgage in purchasing the property, then i would leave alone until well into 2011.

[NoelWatson]

Wings said:

then i would leave alone until well into 2011.

You mean the decade long bubble will unravel in the next 12 months? There will be blood on the streets!

[groak]

There's a lot of stuff around just now that's really really cheap. I got hypnotised by 'Market Value' for a year or two, and forgot that for a dealer there's really no such thing.

Chatting to a fellow vulture the other day, he was telling me about a couple of his recent deals. He actually bought one I'd had my eye on in an auction I managed to forget to attend. He got it for £15k - £5k below what I'd have been prepared to pay - and flipped it to a guy for £25k. He's selling about 1 a week, which is really pretty good, but whereas we were all making £10k-a-time on everything pre-crash, he's now netting as little as a grand per flip, which is really just a sourcing fee.

He also tells me hardly anyone's bothering to go to the auctions anymore - mostly because of the scarcity of funding. But selling a couple of unburdeneds generates the funds to do a bit of buying/flipping. The old art of buying them for as little as possible is back, rather than trying to compare them to a very ephemeral 'market value', which is how some classic mistakes are made.

O, forgot to say, that £15k flat rents for £300-£350pcm. And I've just rented a small shop I bought for £4k at a very generous (on my part) £200pcm. There was £225pcm and £250pcm on offer, but the £200 tenant gave me a better package. That's more like what a pro calls a good yield. And these days with so many cheap properties available, 20% should be the benchmark.

Edited by groak on Thursday 23 December 17:57

[ColinM50]

What part of the country are you in to be able to buy property at those sort of prices?

[groak]

ColinM50 said:

What part of the country are you in to be able to buy property at those sort of prices?

I'm in Glasgow, but that's not really relevant. Bargains can be had anywhere in the world. Right now the UK is good, because the market is so dead that anyone who really needs to shift property has to reduce price to silly levels. And not all auction stock has a reserve, so if no-one who goes is in a buying mood the auction's your oyster! Check out Future Auctions in Glasgow. Just look at the amount of unsold stock left over from their last sale. See what I mean?

[NoelWatson]

groak said:

ColinM50 said:

What part of the country are you in to be able to buy property at those sort of prices?

I'm in Glasgow, but that's not really relevant. Bargains can be had anywhere in the world. Right now the UK is good, because the market is so dead that anyone who really needs to shift property has to reduce price to silly levels. And not all auction stock has a reserve, so if no-one who goes is in a buying mood the auction's your oyster! Check out Future Auctions in Glasgow. Just look at the amount of unsold stock left over from their last sale. See what I mean?

What is your definition of bargain and also silly levels?

[anonymous-user]

Another of my rules of thumb, that (rightly or wrongly) precludes lot of properties available at 'bargain basement' prices, is that I only buy somewhere that I would be happy for my kids or my parents to live in.

[groak]

NoelWatson said:

groak said:

ColinM50 said:

What part of the country are you in to be able to buy property at those sort of prices?

I'm in Glasgow, but that's not really relevant. Bargains can be had anywhere in the world. Right now the UK is good, because the market is so dead that anyone who really needs to shift property has to reduce price to silly levels. And not all auction stock has a reserve, so if no-one who goes is in a buying mood the auction's your oyster! Check out Future Auctions in Glasgow. Just look at the amount of unsold stock left over from their last sale. See what I mean?

What is your definition of bargain and also silly levels?

It's got to be defined by yield, but guesstimating net can involve different criteria for different properties. Bargains at the moment probably start where you can realistically guesstimate 10% net. And obviously when the price means you'd have to leave it empty to fail to make money, the bargains define themselves.

Remember we're talking buy-to-let not buy-to-sell here, so potential capital gain isn't in the equation, although the higher net yields have obvious appeal to the flippers because even these days a margin can be readily gained and even a profit sometimes, especially at the lower price levels where cash is easier for buyers to find. I'm offered £10k for the shop I bought at £4k. But I can have almost that every 4 years so I think it'd have to be £15k (which would bring a decent gain in anyone's book) before I even wanted to think about it. By the way, £4k's not my "vulture record". I nabbed a small shop a couple of years ago for £2.5k. It was doing £300pcm for a while, and is now on LTA at £3kpa. It's going to be sold in 2011 for £25k to a Polish girl who works in one of the offices who wants to give it to her mum to run as a hairdressers.

Sadly, where once sales were 15 a month with good profit on everything, now 1 a month is ok. But now is a great time to build up stock providing it's letting margin is really really good, because as you'd be the first to agree, we may not be looking at 2007's prices for .............years.

[dave9]

i wouldn't bother.

go fix a cracked pipe now, a frozen door lock all this rubbish takes time, viewings etc, missed rent, void periods.

i honestly don't think its worth it for the few hundred quid you make per month - working in a bar would be far easier and more profitable.

its the capital gain where the money is but i can't see that for a while.

ps if you have a terrace in knightsbridge that you rent to a footballer and have the football club as guarantor for £25k per week then it may make sense

[groak]

dave9 said:

i wouldn't bother.

go fix a cracked pipe now, a frozen door lock all this rubbish takes time, viewings etc, missed rent, void periods.

i honestly don't think its worth it for the few hundred quid you make per month - working in a bar would be far easier and more profitable.

its the capital gain where the money is but i can't see that for a while.

ps if you have a terrace in knightsbridge that you rent to a footballer and have the football club as guarantor for £25k per week then it may make sense

Believe me, Knightsbridge terraces aren't where the money's made from letting, and the CG's the icing (and sometimes the cherry too)! problem is, once the CG's realised, the rent profit's gone.