How do you measure buy to let against other investments?

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    How do you measure buy to let against other investments?

    Say i have a 200 k house with 100k mortgage at 2%.
    I consider re mortgaging back up to 75% to release 50k and buy another house at 200k. Therefore 25% deposit on each.
    Say I get 10k a year in rent.
    A gross yield of 20% on my 50k? Or 5% on the 200k?
    plus possibility of capital appreciation, but lets ignore that for now.
    Am i along the right lines here?

    #2
    May I direct you to the Internet and google”

    How can I work out the real-life rental yield on my buy-to-let - and whether the investment is worth it?,

    This will give you multiple explanations but one of the best is located on This is my Money.

    Comment


      #3
      Have you a link to this please

      Comment


        #4
        You work out your total worth at timepoint A and compare it with your total worth at timepoint B

        (taking account of taxation regimes, loss of interest on capital).

        Everything else is a nonsense

        which is why you see ludicrous comments on fora such as this where property owners say things like

        "I don't care whether property prices fall because I don't plan to sell"

        or

        where taking a 10% mortgage on a £300K property you get fanciful yields of 30% taking the mortgage amount as denominator and ignoring loss of alternative potential income on the other 90%.

        Comment


          #5
          Just cut and paste the words and the google search will deliver the results.
          Currently out of office so best I can offer at the present.

          Comment


            #6
            I like to work out my ROCE it appeals to my vainer side.
            "I'm afraid I didn't do enough background checks apart from checking her identity on Facebook" - ANON

            What I say is based on my own experience and research - Please don't take as gospel without first checking the gospel yourself.

            Comment


              #7
              http://www.thisismoney.co.uk/money/b...alculator.html

              but that's way too simple a calculator to give you anything but a very vague estimate of your best possible return. There are all sorts of things that will eat into your profits and lower that yield, and it's very tempting to not be entirely honest with yourself (or others) about what the actual yield really is once everything is taken into account.

              In any case, the question you asked in your title really has no relevance to this unless you are considering things in purely financial terms (which is arguably foolish). Property has a hell of a lot more uncertainty than, say, govt bonds, or other financial investments where you simply shut money away and then hope it increases in value. At least those don't call you in the middle of the night with burst pipework.

              OTOH, property is a lot more tangible and controllable than finance locked away in a 5 year structured product. And the market is often a lot easier to engage with as an independent investor.

              You might as well ask yourself how long your own piece of string is...

              Comment


                #8
                Different investments perform differently at different times. The returns vary, the risks vary, the workload needed varies.

                Spread your money about (at least 3 different areas). Some risky (better returns) , some not.

                You never know if any one thing was a good idea or not until you finally sell it (or die 1st)
                I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

                Comment


                  #9
                  Yield = what return you get on the purchase vs rent. 100k house rents for 10k then you have a gross yield of 10%. If insurance, management, bills, repairs average 4k per annum then you have a net yield of 6k or 6%. This is obviously not including capital growth. ROCE = the total return on the amount of cash you put in

                  Comment


                    #10
                    Originally posted by AndrewDod View Post
                    You work out your total worth at timepoint A and compare it with your total worth at timepoint B

                    (taking account of taxation regimes, loss of interest on capital).

                    Everything else is a nonsense

                    which is why you see ludicrous comments on fora such as this where property owners say things like

                    "I don't care whether property prices fall because I don't plan to sell"
                    I am sorry but I have to disagree. Total worth is probably the most common target when investing in property, but there is another - income. When I lost my job in 2013 my aim was to provide enough income for me to live on until my pensions were due. So I bought properties I expected to have good yields but probably little capital growth. I knew that long term this would make less than going for properties likely to get capital growth but lower yields, but in the short term I needed the income. I tried to protect myself from falling prices by adding value by refurbing the first two properties I bought. Small falls would not have bothered me but I hoped they would keep up with inflation. long term. As it happens I have had good rises in the last year but that doesn't do much for me. It is still the income that matters.

                    Comment

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