4.3% yield on buy to let good ?

Howitzer said:
Just to correct a small matter. The "leverage" in this case is costing the OP more than the asset is earning. The sock at the bottom of my cupboard gives me a better return than that. I'm not advocating equities either, I'm just highlighting the costs versus returns.
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Your sock will give give you zilch return one way or the other over the next twenty years. Beause the cost of funds exceeds the return at present( in this particular case) does not mean that the investment won't show a positive return at the end of twenty years. ( which, imo, is the timeframe for an rpi play)
 
demoivre said:
Your sock will give give you zilch return one way or the other over the next twenty years. Beause the cost of funds exceeds the return at present( in this particular case) does not mean that the investment won't show a positive return at the end of twenty years. ( which, imo, is the timeframe for an rpi play)
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Well all anyone can know is that the OP would be making a loss for the foreseeable future. Combined with transaction costs it is hard to see the OP being in positive territory for a significent period of time. Every month that you pay more in interest than you receive in rent probably pushes your breakeven point out by another 2 months. Goodbodys [broken link removed] houseprices to fall 8% next year after falling 5% this. I can't tell the future but I can tell when someone is making a loss today. If you have some further insight that allows you to gauge where the value of the asset will be at some point in the future then go for it.
 
Howitzer said:
Well all anyone can know is that the OP would be making a loss for the foreseeable future. Combined with transaction costs it is hard to see the OP being in positive territory for a significent period of time. Every month that you pay more in interest than you receive in rent probably pushes your breakeven point out by another 2 months. Goodbodys [broken link removed] houseprices to fall 8% next year after falling 5% this. I can't tell the future but I can tell when someone is making a loss today. If you have some further insight that allows you to gauge where the value of the asset will be at some point in the future then go for it.
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I know nobody, bar none, who has made any serious money over the last twenty years or so in any asset class , that appraises an investment solely on the basis of return/cost today - it's a farcical approach imo. I couldn't care less what Goodbody or anyone else is forecasting for property prices for the future - you can't tar all property types with the same brush.What we can say is that YTD property prices are down about 3.5% which puts a lot of the drivel about crashes in to perspective (make yourself a cuppa, put the feet up and go back and read the house price crash predictions for 2007 made in 2006 in the house price sentiment thread - it's hilarious stuff), though I always felt that being cooked up in a 350 sq. ft., rented bedsit tended to distort some peoples view of reality.
 
demoivre I have to agree with you.
I have a similar portfolio to the op and am naturally bullish in view of my experience in picking a property investment and the general demographics.
If property goes up down sideways or ar**eways in the short term is pretty much immaterial to me as over the long term it will appreciate.
There are plenty of ways to make money in the short term but property historically is not one. The recent bubble is the exception rather than the rule. Re the leverage I assumed my effective interest rate is less tax relief which leaves it at 3%odd which is less than bank deposit rates which to my mind makes it a no brainer to leverage into residential property with good rent roll? Couple this with section 23 etc umbrella from any tax liability this makes the property portfolio a rock solid long term investment but don't expect Goodbody to tell you this!
 
markowitzman said:
Re the leverage I assumed my effective interest rate is less tax relief which leaves it at 3%odd which is less than bank deposit rates which to my mind makes it a no brainer to leverage into residential property with good rent roll? Couple this with section 23 etc umbrella from any tax liability this makes the property portfolio a rock solid long term investment but don't expect Goodbody to tell you this!
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Are any of these points relevant to the OPs scenario as has been described in the thread? The OP will not be receiving any S23 relief. Their return won't be 3% but -.45%

I've answering the OPs question with explicit refernce to the figures they have provided. I referenced the goddbodys article to highlight that noone can predict the future. Speculating on the future of property prices can be done down the pub.
 
Speculating on the future of property prices can be done down the pub.
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Inthe short term yes but over what 20 year period did property lose value?
Howitzer op's return is not 3% but his effective interest rate is less than bank deposit rates or inflation.
 
my question is generating good debate, as part of my portfolio i have a s50 apt which covers any tax liabilities, as i said i have an existing house in this estate which has seen rent increases year on year with no problem i bought it to include all contents so i have nothing really to put in bar tenants in the new year, and hopefully interest rates will remain static or fall, at 370k and 16k rent roll it is a long term investment
 
markowitzman said:
Inthe short term yes but over what 20 year period did property lose value?
Howitzer op's return is not 3% but his effective interest rate is less than bank deposit rates or inflation.
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erm...Japan is making a good stab at that particular record at the moment. Germany has had maybe two years of property price increases in the past 12 years. Indeed, look at any developed country that has had to endure a severe financial and or economic shock and you will find protracted periods of falling real prices.

As you say this is a 20 year investment but this is a long period of time over which to accept such a poor relative return.
 
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