Rent - 950
Yearly rent -11400
Purchase price - 96k

Gross Yield - 11.9%

Thanks a bunch Onitsuka!

gross yield seems like a flawed way to think about rental investments. ROI or CAP rates much better. Gross yield on the student rental i bought this year (in USA #1) would be 18.5%. $1400/mo @ $91k purchase price. In actuality my net return after all costs/mortgage/insurance/etc will be $6k on a $21k outlay at purchase or a 28.5% ROI.

Net yield or ROI is best way to compare investment. As I manage my flats through my letting agency my net yield will be higher than a lot of investors who have to take into consideration management costs.

A real life example of a flat I bought in December 2014, which is high yield and rented to young professional...

PP £66,000
Refurb £3000
Solicitor.mortgage broker £1000

Rent £550 pm
Mortgage Payment £166 Interest only, 25 years , 4%
Factors/Insurance £70x12 £840per year
Cash Flow £312x£3768 per year

Gross Yield 9.42% (£6600/£70,000)
Net Yield 8.22 (£6600 less factors+insurance £840/£6600)
ROI 18.38% £16,500 Deposit+£3000 Refurb+£1k Solicitor= £20,500

Cheers LuckFactor! Ive met you before at Aussie Millions, you used to play as HeathEli right on Ongame?

In Glasgow its not possible to achieve 10% on higher flats, to wildly generalise the higher the purchase price, the less attractive it will be to BTL investors as the yields aren't there. Some investors in London buy for capital growth purposes and accept no yield on a 2-3% yield at the most.

My investment strategy is to invest for yield and cash flow and the capital growth will come. Reason being (and this might not be correct) is in general UK property prices double every 10 years, my strategy is to get the cash flow right and believe that the growth will come. I stress test all of my investments against interest rate increases on BBC mortgage calculator and make sure that even if interest rates rise to 6% my flats will still make money and a positive cash flow will still be there.

What sort of detail would you like me to go in to? I like to keep transparent in my business, so I keep all of my own properties listed on my website to show what rent they are getting and if they are let out. I also did wrote a blog recently which Iv copied and pasted below, its titled

An Example of An Off Market Purchase

Hi everyone and thanks for taking the time to read my first blog post, I am going to try to make these posts fortnightly regarding topics that I think are relevant in the property world and specifically to Glasgow properties. Any feedback or questions please feel free to post on Facebook or get in touch [email]info@*****************

A Below Market Value (BMV) property is simply a property that is sold Below Market Value. Property Sourcers and Investors are often looking for the purchase price of a flat to be BMV. However, my view on this is if a property is sold on the open market therefore I believe there is no such thing as a property sold at BMV, as the purchase price is the true price of the property, therefore it is Market Value.

One way in which investors can purchase properties which are truly BMV are by making Off Market purchases. You might wonder why anyone would want to sell a property Off Market and BMV, well often it is a case of necessity rather than need. Owners are faced with some kind of financial difficulty and want to or need to dispose of their property quickly and without going through a protracted marketing and sales process. Or it can be through a couple that split up and just want to get the flat sold as quickly as possible.

In the example below I will show how an Off Market Deal worked for one of our investors, regarding a 1 bedroom tenement flat in Main Street, Bridgeton, G40.

The lead came to me through a very reliable and excellent joiner who I have used over the past two years for renovations/kitchen fittings and various other handyman tasks. He has lived and worked in the East End for a long time and knows various people in the community. He approached me and said that he knew someone who was going through a divorce and wanting to sell as soon as possible. She had been told by an agent, the 1 bedroom tenement flat, with fully refurbished close, in present condition would be worth £40,000. Having looked at past sales on the street (and owning a flat there myself) I believed that in present condition the actual market value was closer to £38,000. She was looking for £31,000 (including furnishings) to complete within 3 weeks- which would be a genuine 17.5% BMV deal. Quickly realising that this opportunity was too good to pass up on I contacted an investor friend (that I manage two other flats for in the East End) who I knew was looking to buy to see if he was interested. He was very keen and we viewed the property the next day then sat down to work out the figures.

Kitchen- 8 units to be replaced, disposed off and worktops, new flooring and tiling -£1000
Bathroom- Shower to be installed, cable to be ran from fuse box into bathroom and retiled, lino to be put down, shower screen to be fitted -£500
Bedroom- Electric Radiator to be fitted £150
Hall- Electric Radiator to bet fitted- £150
Windows- 5 sash windows to be sanded down and painted £200
Flat- Ceilings painted and kitchen walls £400
Sourcing and Project Management – £500

Total £2900

So we budgeted £3000 for the works.

Quickly figuring out total investment would be £35,000 after solicitors fees. I said I would be very confident of achieving £400pcm for this flat in the finished condition furnished.

The investor agreed the purchase of the flat for £31,000 in cash and completed as promised on time. The flat works came in exactly on budget and upon listing the property online received 15 enquires within the first week and was rented out immediately to a tenant who supplied all of the references required.

The gross yield on the property is 12x£400=£4800/£31,000= 15.5%
The net yield on property is 12x£400=£4800 -£600 (management fees 12monthsx £50) – £480 (insurance/factors 12x£40) = £3720/£35,000= 10.7%

The property cash flows= £400-£50 (management)-£40 (insurance and factors)=£310. All staying in equilibrium this property will have paid back the investment of £35,000 in 9 and a half years, thereafter it will be purely profit and the investor will still own the asset outright. Out of interest we had the property valued by a local estate agent and she indicated that it would value now at £40,000.

Furthermore as the property can now achieve a valuation of £40,000 (Buy To Let Purchase Price Minimum) it is now mortgageable as a buy to let investment. An option for the investor is now to mortgage the property at £40,000 and release £30,000 of equity leaving £10,000 in the flat. An option would be-

Mortgage with Birmingham Midshires
Valuation £40,000
25% Deposit £10,000
75% Released £30,000
Rate 4.14% fixed 3 years, term 25 years
Interest Only Payments of £104pm

If the investor chose to do this he would then have £29,000 (less mortgage advice/solicitor fees) of his initial £35,000 outlay back. Meaning he only has £6000 left in the deal. The mortgage would be easily covered by the £310 profit netting him £206 profit per month after all fees. Thus giving him a profit of £2472 per year which is a ridiculously high Return on Investment of 41.20% annually.

Summary
◾Purchase price 17.5% BMV
◾Gross Rental Yield 15.5%
◾Net Rental Yield of 10.7%
◾ROI 41.2%

Glasgow really does sound an amazing place to rent out properly... No scumbag tenants who run off without paying, no scumbag tenants who completely wreck your property, properties that let themselves without advertisement, no downtime between tenancies, no cleanup fees, when you have an emergency the plumbers and electricians work for free, no wear and tear, no maintenance, gardeners maintain your grounds for the love of it, no long-term window/roof repairs, house prices double every 10 years; irrespective of wage growth, the only possible risk is an interest rate rise because property never goes down in value, stupidly high ROIs through leverage with no possible downside, ... yep sure does sound a great place!

Juk

PSA: If you actually want to know what it's like to be a landlord, then find somebody who's actually rented out property for several years and ask them about their experiences... They'll likely tell you that it's generally a ****load of hassle for little more than you can get from investing in index funds and the CGT implications are horrendous if you ever want to try to realize profit from any (possible) future house price increases.

FWIW, my extended family have been renting out property in the UK since the 1940's (so long in fact, we still have some tenants with the old-style "assured tenancy" agreements in force!) and if it wasn't for CGT implications, I doubt anybody in my extended family would still hold any property at all... The "golden age" (if there ever was one) is well and truly over.

Yes Juk you are totally correct Glasgow is a great place to invest in at the moment. All the negative points and risks you mentioned can be minimised. No scumbag tenants, as good agents check references from prior landlords, employers and obtain credit checks, if students this process is done for parents and a parental guarantor form is signed. Downtime minimised as leases have a 2 month notice period and a 6 weeks advertising clause so you can advertise and view when tenants are in place, this is normal practice and expected. Clean up fees, all of this is covered in the deposit which are registered with Safe Deposit Scotland ie if tenant hasn't returned property in condition it was left in you can claim for cleaning against the deposit. Wear and tear is accounted for in your tax returns 10% wear and tear allowance against furnishings. Gardener isn't common for my type of city centre investments, but those with communal gardens are taken care of by the factor and this is split across the development.

Of course repairs are to be expected that's a valid point and those investing in property surely expect it at some point The key is to try and make sure everything is a good as possible when refurbing the property before renting out so less problems will arise. Also when you do have to replace and kitchen or bathroom, do it properly and nicely so it adds some value to the property.
Roofs on tenements need replaced every 20-30 years, good news is the cost is split between 8-16 flats.

I would encourage people to speak to those who rent property in their local areas, it could be a guy with 20 flats or one accidental landlord who moved in with his girlfriend and rent their place out. Find out about yields, down periods etc. Then if their experience is good, find out why it is working, is it an investment with solid fundamentals ie near Unis, transport links, close to town, large employers, local area amenities etc If it is poorly perfoming ask yourself why? Was purchase price to high, is it not in an area of high demand, do they have a bad agent. If its good think about copying idea, if bad ask what they are doing wrong and how you could make it better.

It would be good to hear from other investors in property in the UK and their experiences.

No offence but that seems crazy optimistic. In the past this has not happened if you go back long enough. A double in value (after inflation I assume?) is 7% a year! For a low risk investment. expected return on equities is 7% lol. Which are considered much more high risk.

Also think about this logically. If this would happen for 40 years, home values will go up from about 80k to 1.2 million (or a 15 bagger). After inflation (or otherwhise value didnt really go up).

Now if salaries go up only 2 to 3% after inflation (this is actually much lwoer right now, closer to 0%), that means the average 35k salary will be 107k after inflation. So taht would mean that a simple flat would become completely unnaffordable if you really think this will be a long term trend.

What is more likely is salaries staying where they are like happened in the last 15 years. If flat values grow 7% then over the next 10 years, an average flat will go for 160k pounds, making it unnaffordable to most people. Wouldn't you say a ton of new flats would be produced before that happens?

Also looking back at history you will see that house values tend to not rise much after inflation (or barely at all really). They only did once the markets were being flooded with super cheap money and very loose rules and regulations pre mortgage crisis. Like mentioned already, you could just fill in your own salary without being checked on a mortgage. More people borrowing who shouldn't be = more demand = upwards pricing pressure on a relatively fixed supply.

I would actually say that deflation is more likely. When countries are loaded up to their ears in debt, generally what happens is deflation. Just look at Japan where property values have been going down in the past decade. Id say we are moving that way too. More aging = more old people selling their homes = less population growth. And deleveraging means less people borrowing. Id say you would be lucky to get 2% price appreciation after inflation a year. That would mean 28% growth in 10 years.

I would heavily discount everything this guy says imo.

Yep. Goosey is trying to get customers, so he's the opposite of incentivized to give an accurate picture of the real returns and hassles and costs of renting. Juk on the other hand is impartial. The example Goosey posted is LOL - in my experience getting major renovation worth for that cheap is very unlikely. Quality work, it's impossible.

I highly doubt the example he gave, even if true, is typical. He's claiming near mid range rent while buying the very bottom of the market. And taking a 12% management cut + possibly fees for the renovation. A nice little business, which is why he's coming to 2+2 to get marks rather than investing more of his own money (or borrowed money) in these "amazing" opportunities.

By the way, we're in an environment of ultra low rates, about to go up. What happens when rates go up? Rents have nowhere to move as they are already historically high and a high percentage of wages (especially for the low end). But buyer demand will go down. Which means the properties bought this year are likely to depreciate in value. It's a terrible time to get into real estate. 2009/10 was the time to buy.

yeah watch out for this guy, dont do any deals with him. Only decent deal right now is to buy a house in a good area to live in with these low rates. And hope some inflation happens to make your long term mortgage really cheap. Likely your home value will stay around even over the next 20 years, but we could see some serious inflation down the line, making that 3.5% mortgage really cheap.

Here's a recent article for a bit of balance (rather than "double every 10 years") about where property prices might go with the coming rate rises:

http://www.theguardian.com/money/201...housing-market

Also interesting from that article:

The whole BTL thing is so depressing in the UK.

What's your thoughts on how another independence vote might affect property values? No thoughts on diversifying south of hadrians wall to hedge against it?

Renfrew here btw. And ex mortgage broker, now more focused on fund sales

I think it makes sense to invest in property in an area you know well and know the yields stack up and demand is high. All the information I am sharing is real life examples of flats I own in Glasgow and my views.

ToothSlayer you are claiming the information I am supplying is incorrect. Go on to my website, ask about any purchase price of any flat I own or rent out (or check historic prices on Rightmove) I will tell you, ask about any rent I will tell you and show you a prior advertisement online or contract. Don't question my integrity, I am sparking a discussion regarding UK property BTLs and sharing my story. You are sharing you views which to me seemed misinformed and I am sharing real life examples and experiences.

I'm not claiming the rental/purchase price information is incorrect. I claiming you are telling one (incredibly biased) side of the story.

You initially made a post looking for marks, asking people to contact you. It was locked because it was shameless spam. So part of your purpose here is to make renting in Glasgow look good, as you get money when people buy in and use your agency fees (whether they lose money or not). Thus you are heavily incentivized to not be completely truthful. Meanwhile, jukofyork, a highly respected poster, is sharing his long experience and knowledge of the rental market, which is the opposite of yours and more in line with what most people experience - lower return, hassles, cost and risk.

Multiple people have called you out for being ridiculously one sided, cherry picking the best (and rare) examples, sugar coating everything, and telling nothing of the downside. You have not given a single story of problem tenants, costs or issues.

You are simply not presenting a balanced picture of the buy to let market. Why would you, when your goal is to get marks to buy and take 12% off the top (plus whatever kickbacks you might get), whether or not their investments go to crap.

I would not have participated in this thread had you shown the tiniest amount of balance. You made an error of judgment only presenting the rosy cases, talking about all the appreciation possible. You've created a situation where multiple people now think you're full of ****/not worth trusting for an accurate picture of buy to let investing.

Be a little more balanced and people won't call you out. It's just basic business sense.

Congrats on making the transition/starting a business/doing something useful after poker

I am sharing real life experience of it, il repeat again I think people should invest in their local area that they know. It might sound rosy and biased because for me it has been good, I have achieved capital growth in an area I know very well and have excellent cash flows and yields across my investments. If you want some stories of investments that have gone wrong I am happy to share them as I have three of these.

Thanks for your congrats, I would like to inspire and show those who have been playing poker professionally that there is alternatives when poker is over.

I am happily to answer any questions about my poker or business....

Also accept my first post on initial thread wasn't well thought through and all over the place. That's why I did this one with a new message to show my journey and spark UK BTL discussion as I firmly believe it's perfect for a poker player to be investing in. Yes people have called me out on this thread and that's fine 2p2 is notoriously hard place to post views and stories.

Finally and don't take this as an insult. You have challenged my yields etc and posted average rents etc in Glasgow. What I think you are missing is that it is an average rent you are posting and average yield. Good experienced investors take advantage of yields well above the average, your example shows 6 percent average yield on Glasgow, I don't accept anything less than 9% as that's what good investors do, take advantage of higher yielding opportunities.

Qualifying your statement here with (this may not be correct) is a bit of a joke because except in exceptional circumstances, your quote is flat out wrong.

You can take UK inflation on average over your lifetime to be about 3.2% PA. The last 10 years has seen property struggle to even hold its value in numerical terms let alone beat inflation let alone double in value (even if you don't take inflation into account).

I am extremely well versed in the local market where I am. Buy to let property here is selling for the same actual price as it was in 2008. That is without taking inflation into account so in reality it is selling for significantly less money purchasing power wise.

You seem to forget in your OP that buy to let propertys are almost always bought by investors, who will never overpay for a property. People overpay/get into bidding ways for their dream homes they are going to live 20 years in. They don't overpay for a BTL flat they are buying as an investment. There are strict rules on mortgages when buying a BTL, you are not going to get approval for anything other than an offer on the cheaper side of fair. You are almost NEVER going to double your money in real purchasing power terms over 10 years of owning a BTL.

That said of course you can make some money and get a source of income owning a flat to rent out or w/ever but you are wildly off base with your figures.

Wildly off base with what figures exactly??

BTL property value doubling every 10 years. Even if you don't take inflation into account in the figures that is still wildly off base.

Wildly off base with my figures? What figures? My statement that UK property prices double every 10 years


There are strict rules on mortgages when buying a BTL, you are not going to get approval for anything other than an offer on the cheaper side of fair.

This is not applicable in Scotland, all public sales of property ie listed online etc require Home Reports. You can only get a mortgage on the purchase price of a property up to the HR, anything above you need to pay in cash. Unless you believe a property is undervalued in the HR then BTL investors will not be paying more that HR anyway.

What area of the country are you extremely well versed in? Why don't you share some examples of rental yields and investments you have made?

Yes, you are extremely off base with the statement UK property prices double every 10 years. Are you really going to try and peddle that crap on here?


I am not going to tell you areas or what I own. I do have direct experience of BTL. It is not great but it does OK for me I guess. I cant stand to see people spout bull**** though, like "prices double every 10 years".

Just to provide some proof for my disregarding of your claimed figures.

http://monevator.com/historical-uk-house-prices/

WITHOUT TAKING INFLATION INTO ACCOUNT house prices increased by 418% on average in the UK between 1983 and 2012 (so 30 years roughly). This is way off your claimed increase of prices being 800% of what they were(doubling 3 times, once every ten years).

Once you take inflation into account and therefore the real value of money house prices have only doubled over 30 years - a 101% increase.

Buy to lets by their nature will show lower average increases. They are only bought by investors.

You can invest in them but stop making joke claims about values. If you want to more than double your investment in 10 years there are far better ways to try and achieve it.

Yes I am well versed, yes my BTL is just doing OK. It's fine and providing me with income and some small capital appreciation. That is the reality of a good BTL, not the bull**** you are peddling. I could make more if I took on the hassle and didn't use a letting agent. I could also make more if I bought auction propertys and did them up or something. Neither appeals to me

Me and my investments are doing just fine ty. I have plenty of other, higher return but riskier, investments other than BTL.

You failed to address why you made a bull**** claim in your OP about price increases. You do not understand the market or you are lying deliberately. Either way you should not be taken seriously. It looks to me like you are just trying to round up people to use your lettings agency so you get your 12% or whatever. This thread should have stayed locked.

Also btw, betfair left cryptologic long before you started playing if your OP is correct time wise. If you are just mixed up and you really did play on crypto when betfair was there then regards, we will have played a ton against each other.

Since 1952, UK house prices double every 9 years, here is data below which backs it up. I didn't mention inflation in my OP. So please tell me again what is wildly innacurate about my statement about UK house prices doubling every ten years. Shortest period being 5 years and longest period being 13 years.

http://www.nationwide.co.uk/about/ho...xtab:uk-series

FYI you can see the same data adjusted against inflation if that's what you base your data on (I didn't mention it my OP)

I am showing real life examples of what I have done with my life after but thanks to poker, I don't claim to be an expert in the housing market. I do know my local area very well, just like you claim to by saying you are extremely well versed in your local market.

Nit picking about my original statement of timeline of poker career is a bit strange, back in Crypto days I played some on Sunpoker and Interpoker too. Yes we probably played loads together, Billy555, MGS84 were my user names on Crypto. How about you?

Be good to get some other people in their own markets to show some examples of yields they get and if anyone else is investing in BTL property.....

I will pm you my old crypto names now. Had a few bcos I played all the skins like totalbet, interpoker, ritz club London etc for the £5 ph monthly reward thing you could get ontop of rb. I did mainly play on two nicks though. Played on there 03-07 they didn't even open NL
Tables till late 03