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TPP 360 - Question


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Hello please forgive a newbie question, I've been researching for some time and coming up with a strategy and thought I was doing well until I heard a comment about the answer to the FAQ 'How many properties do you own'.

The gist (paraphrasing) was that it's better to own one £250k home and rent it out than five 50k homes. However, this is similar to what I was modelling and the rental income from one 250k home would only be equivalent to roughly that of less than three 50k homes. I assume that the capital growth would be higher for a 250k as it will be higher quality and a nicer area (honestly it's not something I've researched as rental was my primary concern i.e. covering the mortgage with rental income and making a profit on top).

My question as a newbie, as it wasn't really explained in the podcast, is - am I totally off in my thinking here? Am I missing something totally obvious and should change my strategy to look at fewer high value homes as they mentioned? 

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Hey I think your analysis is spot on - you’re after yield not capital growth, so depending on area, you absolutely would get more yield from more smaller homes. I’m doing the same and am being careful not to get the really cheap houses as the quality of tenants can be lower. I’m looking at mid areas where there are renters but also first time buyers so that I have a bit of capital growth/ exit strategy that does not rely on landlord purchasers. Also think about 5 boilers and 5 sets of maintenance when keeping a cash buffer. As an example in the north you could pick up a house for 60-80k, mortgage and fees less than £200, rent £450-500, so £250-300 pounds per property pretty standard. I had a £250k mortgage interest a 400k property that would have great capital growth but only £700 net cash flow, vs £1250-1500 on the portfolio. Better if only chasing yield and spreads the risk of bad tenants. Good luck with it all. 

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