Property investment question

[ChimpMaster]

Just wanted to gather some thoughts from those of you already invested in the BTL market here.

A hypothetical view on ROI :-

If you have £150,000 in the bank, you will probably be lucky to receive 0.5% interest on this, i.e. a return of £750 annually.

If you buy a property for cash outright, for £150,000, you can probably achieve a rental income of circa £700/month (£8,400/year), which is a return of 5.6% annually.

For the same base money, you are getting more than £7,500 a year more if you invest in this property.

To the property boo-boys: if prices fall, that £7,500 extra in income can be seen as a buffer, i.e. it's money that you wouldn't have had anyway if you left your money in the bank.

I'm naturally quite bearish at the moment but it seems like property is now a worthwhile option, especially given the appalling ROI in banks.

[BlasterBates]

I would still stand back, prices are not suddenly going jump up, and the consesnus is price will still go down or at best flatten off.

I would see no reason to jump in.

There are high yield bonds out there and the stock market is beginning "the mother of all bull markets" that is if property prices go up, the stock market will be in the stratosphere.

[ChimpMaster]

I would still stand back, prices are not suddenly going jump up, and the consesnus is price will still go down or at best flatten off.

I would see no reason to jump in.

There are high yield bonds out there and the stock market is beginning "the mother of all bull markets" that is if property prices go up, the stock market will be in the stratosphere.

I don't quite believe in the stock market bull theory just yet: it just cannot be that easy. My thinking is still very bearish on stocks (to my great loss this year...).

Can you please advise where to look for high yield bonds? Nationwide have something like a 4% bond if you lock up your funds for 5 years, but I wouldn't call that a high yielding bond.

[bellymonster]

Don't forget that you actually have to find tenants too.

I would think there is a glut of properties to rent at the mo, so you'd have to make the rent very inviting to guarantee having the place fully occupied.

That said, even if you just got a few hundred quid rent it would still be a better return.

[DimPrawn]

You can get over 3% interest on you pile of cash:

http://www.ulsterbank.com/ni/persona...ings-plus.ashx

http://www.investechigh5.co.uk/

You can get over 4% with a bond:

http://www.stroudandswindon.co.uk/in...ngs_bond7.aspx

http://www.theaa.com/savings/year_fixed.html


You can get over 8% lending on Zopa:

http://uk.zopa.com/ZopaWeb/public/le...g-at-zopa.html

[Cheshire Cat]

There's the significant risk of not finding a tenant, in which case your yield drops to 0%. Rental yields can also fluctuate depending on market conditions, so there's a market risk there too.
There's also a credit risk that your tenant defaults, or you have to chase them for payment.

Plus maintenance costs will eat into your yield too. Expect to have to redecorate at the end of each tenancy, and over the longer term, you'll have to deal with plumbing, heating, electrics etc.

And you have presumably accounted for agency costs, insurances and the like?

Depending on how long you intend to hold your property for, equities might be a better bet. Potential, over the long term to give greater returns.
You can spread your risk over a number of companies and sectors rather than having all your eggs in one basket.

I'm sure you've considered all of these things, if you have cash to invest. Good luck.

[Cheshire Cat]

Forgot to add, don't forget the trading costs...
If you have £150k to invest, you'll need to pay 1% stamp duty on your purchase, and legal costs (approx £500 - £1000), so you'll only have around
£147k for the property, and that's assuming it's in an immediately rentable state (i.e. you don't need to spend any money on it initially).

[ookook]

Has anyone actually used Zopa? Anything to report?

[Menelaus]

Has anyone actually used Zopa? Anything to report?

When I was on a contract a couple of years ago we did a due diligence as we were considering a major investment in them (we decided not to in the end).

The steps that they go down to clarify the borrowers creditworthiness through underwriting are exceptionally strict - far stricter than any bank and they start (unlike any bank I've worked with) with the presumption that the prospective borrower will fail, not pass, the credit check.

A former colleague has recently written up a model for them but I'm not sure if it's a direct yes / no model or a guidance model.

[DimPrawn]

To the property boo-boys: if prices fall, that £7,500 extra in income can be seen as a buffer, i.e. it's money that you wouldn't have had anyway if you left your money in the bank.

I'm naturally quite bearish at the moment but it seems like property is now a worthwhile option, especially given the appalling ROI in banks.

http://www.moneyweek.com/investments...ash-14794.aspx