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  1. #1

    10% Yield on Single Let - Unicorn or Realistic ?

    Ok - so just curious....

    Is there anywhere in the country that comes close to being able to provide the following "Unicorn" BTL properties...

    • 10% yield on a single let (so not HMO or Serviced Ac)
    • No LHA
    • No "Ghetto" areas
    • Good demand for Tenants and also people want to live there.
    • Doesn't matter if its a 1bed studio or a 4bed house.

    In my experience it seems that the yield ceiling for the above is closer to 7%.

    Anybody able to beat 7% in todays market in some corner of this green and pleasant land ?

  2. #2
    Try hovering around County Durham on Rightmove, I found several properties with potential yields in excess of 10%. Can't guarantee they meet your exact criteria but certainly worthy of further research.

  3. #3
    There are a few places where you can achieve 10%+ yield but I find the killer is always working tenant demand. Peterlee is a good example of killer yields, poor demand. It's worth looking at national property auctions for tenanted investment sales. This will give you a real world view of what is achievable in a given area.
    In my opinion 8-9% with good demand is achievable, buying at the right price is key to achieving this.

  4. #4
    Interesting Pete but I note some properties currently for sale in CD have long standing tenants.
    Also, how come the yields are so high if demand is poor in Peterlee...?

  5. #5
    I would tend to agree that CD might produce the sorts of (gross) yields that you might be looking for. However, it probably will come with a compromise...or two.

    LHA is a distinct possibility (or a low pay worker with a benefit top up potentially) that such a bad thing though?

    The main reason that gross yields are potentially high here is that in many parts house prices are so low. In many cases well below rebuild costs in fact.

    This might be an indication that property is undervalued and could give rise to a future capital gain...but that will also depend on demand from homeowners. It might also be an issue with financing, with some lenders not offering loans at all and others wanting higher returns. I am aware of an investor that is buying a lot of property in that region and paying cash with a view to a block refinancing deal with a commercial lender after a couple of years. You could of course pay cash instead but this brings me onto another point...

    The other point of note here is; what is the correct measure to use to judge your investment? You mention yield (I assume gross yield), however, I would tend to look at a combination of ROI and net annual cashflow for BTL property. The reason for looking at these two measures is as follows. ROI allows me to compare different types of investment against each other, such as BTL, HMO, flips and even stocks and shares say. Both ROI and net cashflow strip out the costs involved in the investments as well. Take a high yielding rental property and then deduct for maintenance, voids, general operating costs (agent fees, insurance, mortgage, etc.) and then see what is left. There is little point having a high gross yield (i.e. high potential paper return) when it takes 2-3 months to let or re-let the place say. There is also no point in having such a low net monthly cashflow in case a major repair bill comes along to wipe it all you need a decent reward in both and % terms to make the exercise worthwhile.

    My conclusion is this...why go hunting for an elusive unicorn when there are plenty of Thoroughbreds and Welsh Ponies around that will serve you pretty well? You just need to avoid the Donkeys is all All of my single let BTLs achieve at least 10% ROI but I believe none achieve a 10% gross yield, I have very few problems with these properties.

    Go looking for the hiled yield by all means but remember...there is always some kind of compromise here.

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