uk or french rental yields

Hi, i'm currently lookin for an investment property in the uk. Rental yield will be a factor for me, so if anybody knows where the best yields in the Uk are could you please let me know. I understand that northern ireland yields are quite low at the moment. Is Wales or Scotland any better? Ideally, I'd love a property in london but with a budget of £200000 i know this is is out of sight (maybe in a few more years).
At a push i'd consider France (ideally Paris or some big city). Does anybody know of rental yields in these cities.

Any advice will be of great help.

Hi,

Yields all over the UK seem to be no more then 5-5.5% now.
Also been looking inside M25 London but its all 370,000 Euros +
Not looked at France except leasebacks but again no more than 5%

cheers ennisboy.
With reguard leaseback to france, have you looked at many? can you recommend any?

Cheers

Hi lyonsa,

IMHO you should stay away from leasebacks in France as mostly they are a very bad buy for foreigners from an investment point of view.

Virtually all leaseback programmes in France are for "Residence de Tourisme" - essentially aparthotels. They are never going to be lived in, therefore completely limiting the market when it comes to resale. They can only really be sold to "investors" looking purely for a rental return. The problem with this is that if you buy a leaseback which returns 5% p.a. the only way it can continue to return 5% p.a. and attract the "investor" at resale is if the capital value does not increase.

So if you buy a regular apartment, and the property prices within the area increase by 35% over 3 years then you make a reasonable return on your investment regardless of rental return. However the leaseback apartment cannot rise in value alongside the general market, because if they did then the rental return (which is a fixed amount) would only be 3.25% and the property would never sell.

French people who buy these leaseback properties can write off a certain percentage against their income tax (Sort of like section 23 here), so it can make sense for them to buy a leaseback from new. For a non-resident however it makes no sense at all as you will not be generating enough income in France to make it worthwhile.

My advice is steer well clear of leasebacks.

Hello all
Sorry gaga, but I am a bit slow in the take up! Could you explain where you arrived at the rental return of 3.25%. It's probably obvious but I just can't see it at this moment

....So if you buy a regular apartment, and the property prices within the area increase by 35% over 3 years then you make a reasonable return on your investment regardless of rental return. However the leaseback apartment cannot rise in value alongside the general market, because if they did then the rental return (which is a fixed amount) would only be 3.25% and the property would never sell.....

Hi- I own a buy to let in central Paris. net yields aren't much different 5-5.5%- the higher yields appear to be in the 10th/11th arrondissements.

If yield is your main focus (as was mine), I'd reccomend you focus on studio apartments where the yield is higher. With your budget you could acquire 2/3 individual apartments- in the 10th you'd pay EUR 120-135k for a decent studio that would rent easily. (around 600eur permonth after charges).

Best of luck!

Hi Lyonsa,
Leaseback v Buy-to-Let

The main advantages of the leaseback are the VAT incentive and the guaranteed rental return. The location is essential, and most of the more profitable leasebacks are often those being used on a business/tourism basis for example. It's important that the residence mixes in with the local economic activity. As a long-term investment, leasebacks can be a suitable option, but it is essential to choose the right management company behind the scheme. If you take out a mortgage then you can offset this against your running costs to remain fiscally negative. The rents will help pay off the mortgage - thus again the importance of location for capital growth. The yields will typically vary from 4.5% - 5.2%.

Concerning the Buy-to-Lets, I would agree that a smaller unit is better if you are buying within a large city... there is more demand for small central units or bigger units in the suburbs. New Build Buy-to-lets outside the main cities can also be profitable. You can invest in a new build apt giving you reduced notary fees, plus some agencies will offer a management company that will guarantee you an insured rental for 6 years within the package.

Agree with previous posters, leasebacks have developed almost into a scam. From being a sometimes reasonable investment a few years back, the offerings now on the market are grossly overpriced, tiny, in often secondary locations and have little or no end of life resale value. Stay away from them.

Re the UK, nothing of use around London in that kind of budget. With that kind of money, go to east Manchester or some other good up-and-coming areas, or to parts of Newcastle, and buy 2 or 3 bed redbrick terraced property. Houses around 80K in Gorton are giving 400 pounds/month unfurnished or a bit higher, which is 6%. Some capital growth still to be had in these kinds of properties. Also try Chorlton as one poster advised here recently, another reasonable area that is getting better and should provide growth.