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Desired Yield


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Hi guys!

Am a complete newbie and am working through book after book all of which includes the basics of gross and net yield, apart from one little detail. What is a desired gross and net yield for a viable investment?

Please can you share with me what yield you look for to trigger a potential deal and how you came up with that figure.

Many thanks in advance, I appreciate you are busy people!

Jamie

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Hi Jamie,

 

As well as yield, why not also work out the Net ROI?  For example, that £20,000 you have in your bank earning 3% could buy you a house which after costs will be earning you maybe net return of 10-15%!

The Liverpool Meetup takes place on the first Thursday of every month, find out more here

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Yield is very much influenced by your budget,where you want to buy and type of tenant. Remember the higher the yield the greater the risk. So a 5 bed house in Fulham will be sub 4% and a LHA HMO in the North may be 25%.

 

I would say a single let you are looking at an average yield of 6% and HMO at 9%.

Regards Simon

Searchlight Finance Ltd

T:01565 654005

 

Landlord and specialist property finance advisor only dealing with investors, landlords and developers throughout the UK and beyond.

Buy to Let - Commercial Finance - Bridging Loans - Development Finance - HMO Finance - Refurbishment Loans - Multi Let - Limited Company - Student Lets - Portfolio Finance

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Thanks for your replies.

Please can you explain:

If I was to go searching for a investment property tomorrow, which should I be concentrating on most

Yields or ROI.

Every book Im reading is mentioning yields, however the one that matters most in my very limited newbie mind is the ROI figures?

Which should I look for most and why?

Sorry if it's a silly question.

Jamie

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Hi Jamie,

 

Certainly not a silly question.

I think every investor is different in how they analyse a potential investment.

Personally I always look at ROI (of the cash I have invested) - this tells me how hard my money is working, and it's thus easy to compare to a savings/ISA interest rate etc.

 

I look for around 10% on a single let property, and would expect much higher for a HMO.

I'm also willing for the ROI to be a little lower (but not much) if I'm buying in an area where capital growth is likely.

 

The actual figures really come down to your own strategy and whether you need a high cash flow - for example if you are going to be living off the returns.

 

Hope that helps.

 

Kylie

Check out my property journey here:  http://diytopropertyinvestor.co.uk/

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Hi Jamie - I would definitely look for 10% net yield or ROI after factoring in some potential maintenance costs and voids. The amounts really depends on area and condition of property ( you just need to appreciate or long void a large cost can quickly eat in to your net yield - however please don't let this put you off )

mark-morris.jpg

The Manchester Meetup takes place on the first Thursday of every month, find out more here

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Is yield your driving factor - or are you looking for capital appreciation ?. I am a yield junkie so this is my minimum ( everybody is different ) - if there are good opportunities for capital appreciation in your local area - then less may be acceptable. I certainly would say - you do not need to invest locally if you don't want to - but it's even more important your get an excellent letting agent/property manager ( in my experience that will make or break you ).... 

mark-morris.jpg

The Manchester Meetup takes place on the first Thursday of every month, find out more here

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  • 3 months later...

Sorry to somewhat hi-jack this thread, but Mark- we are looking to invest in Manchester. Currently in the research stage and looking to build a network of people to work with us. Can you recommend an agent/agents that have made your life easy? I really believe "buy cheap, buy twice". Want to do this all properly from the outset to avoid being embroiled in nightmare scenarios.

 

I'm just a newbie, so not sure how you can contact/PM me. Please let me know if you can help in some way though. 

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Is there an easy, in your head calculation you can do to work out the potential yield?

 

I have downloaded Rob's spreadsheet that will crunch the numbers for me but I am guessing the experienced members on here can see something with potential good yield at a quick glance.

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Hi Rebekah

Firstly I think Manchester is a great area for property investing - it's a thriving city ( like a lot of Northern Cities ) the rental yields are really good. I only really deal in Salford as I know the areas well. Sorry I don't really have a company I deal with locally and there isn't really anybody I would want to put my name to. Do you have any specific areas in mind ? it's really a case of driving round talking to estate agents etc and getting a feel for the place. I would be happy to help where I could. 

 

If you are yield focused - you can buy a property in the Manchester/Salford area - refurb/redecorate and get it in to a good state - place it in a 5 year lease scheme and get a guaranteed rent every month. You can generate an excellent yield and this true passive income. It's also very appealing if you are not local to the area - all maintenance/tenant issues are dealt with by the scheme. I wish I had looked at this a lot earlier.  

mark-morris.jpg

The Manchester Meetup takes place on the first Thursday of every month, find out more here

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Hi Mark,

 

Thanks very much for your honest response. At the moment we are looking at areas with good links to London  (Piccadilly, Ancoats), good links to public transport (specifically the tram line). We're not interested in any of the new builds/high rises- too much competition for renting out cookie cutter apartments. 

 

Salford keeps coming up, but I've also read about it having a fairly shady history?! More research into the area is needed for sure and I understand it covers a fairly large area. I used to live in Inner City Sydney in an area that used to be the city's rubbish dump, it's been completely gentrified and now I can't afford to live there! So I can certainly see that areas which may not have been so appealing in the past may have huge potential for the future.

 

I've started to research the lease schemes you talk about just now and no doubt I'll start a thread on them for more info an opinions. Thanks for the tip!

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Hi Rebekah,

Yes Salford is a large area and has some good areas and some bad ones - for example part of Salford is Worsley, a village which has the historic Bridgewater Canal and is home to premiership footaballers, soaps stars and a very famous english tenor - so not shady and high prices to boot. There are areas to avoid. I think You are right to avoid new builds and look where the transport links are good.

In Salford I would recommend Monton/Eccles both have excellent transport links, good housing stock and reasonable house prices. Eccles is on the tram system to Manchester, Salford Quays (BBC) and behond.

mark-morris.jpg

The Manchester Meetup takes place on the first Thursday of every month, find out more here

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Hi Mark,

 

I am also looking in the Manchester area, ideally areas on the outskirts of the city, heard lots of good things about Monton, Eccles and Worsley of course.

 

Where can i find out about the 5 year lease scheme you mentioned, this would be appealing since I am based south.

 

Thanks.

Joe-di-Fede.jpg

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Hi Rebekah - yes Salford born and bread but definately no offence taken. Salford is often overlooked for its more famous counterpart - however this means still great yielding opportunites to be had. Please don't tell everyone though !

Hi Joe,

Both Salix homes and City West Housing offer lease schemes. Salix would be the one for the areas you mention which is a good scheme. Please note it really only works from a yield point of view if you are buying at the lower end.

mark-morris.jpg

The Manchester Meetup takes place on the first Thursday of every month, find out more here

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