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wow... that rule of thumb makes it virtually impossible to buy-to-let in my neighbourhood. a "Cheap" 2-bed apartment is £150,000 and MAX rent for that kind of p

wow... that rule of thumb makes it virtually impossible to buy-to-let in my neighbourhood. a "Cheap" 2-bed apartment is £150,000 and MAX rent for that kind of place here would peg somewhere about £600, but definitely nowhere near £1500. Even at a liquidation auction or lowballing a desperate seller, there's no way to buy anything habitable for under 60K

breischl 12y ago
To be specific, it's a rule of thumb in the US. I would not be at all surprised if UK real estate works differently. But yeah, in some markets you just won't find things that reach that return. Then you'd have to decide if it's worth buying those properties, or buying in a different market, or just doing something totally different with your money (stocks, bonds, startups, whatever).
- abrugsch 12y ago
  It pretty much confirms my suspicions that it's too late to get into RE (here) unless you already have some. (we almost got a place where the numbers worked very well about 8 years ago, but various delays meant we missed out and got married instead...
edent 12y ago
I do BTL in the UK. For our market, look at 1% of the mortgage. So, if you put down a 50% deposit on a £150k place, you'd want rent of £750. Actually, it depends very much on your circumstances, attitude to risk, how much you're happy to pay in agency fees etc. Also, in the UK, we don't tend to have 30 year mortgages, which makes predicting a stable price very tricky. The UK also has vastly different tax rates - and a changing rental culture - which may also affect the price you want to charge.
- breischl 12y ago
  Huh, that seems like an odd rule-of-thumb. That would guide you to put more money into deals with lower absolute returns, which would lead you to really low ROIs. eg, if you were willing to put down 66% on that property (£100k down, £50k mortgaged), then a £500 rent would be ok. Or am I reading that wrong? I am completely ignorant about UK real estate, so I might be missing something obvious.
  - edent 12y ago
    It's about the minimum you need in order to cover your costs & start making an ROI. Obviously if you can charge more, you'll start making more.
- abrugsch 12y ago
  OK, those numbers are a little more favourable. Good to know if i'm ever in that position again.

breischl 12y ago

To be specific, it's a rule of thumb in the US. I would not be at all surprised if UK real estate works differently. But yeah, in some markets you just won't find things that reach that return. Then you'd have to decide if it's worth buying those properties, or buying in a different market, or just doing something totally different with your money (stocks, bonds, startups, whatever).

abrugsch 12y ago
It pretty much confirms my suspicions that it's too late to get into RE (here) unless you already have some. (we almost got a place where the numbers worked very well about 8 years ago, but various delays meant we missed out and got married instead...

edent 12y ago

I do BTL in the UK. For our market, look at 1% of the mortgage. So, if you put down a 50% deposit on a £150k place, you'd want rent of £750. Actually, it depends very much on your circumstances, attitude to risk, how much you're happy to pay in agency fees etc. Also, in the UK, we don't tend to have 30 year mortgages, which makes predicting a stable price very tricky. The UK also has vastly different tax rates - and a changing rental culture - which may also affect the price you want to charge.

breischl 12y ago
Huh, that seems like an odd rule-of-thumb. That would guide you to put more money into deals with lower absolute returns, which would lead you to really low ROIs. eg, if you were willing to put down 66% on that property (£100k down, £50k mortgaged), then a £500 rent would be ok. Or am I reading that wrong? I am completely ignorant about UK real estate, so I might be missing something obvious.
- edent 12y ago
  It's about the minimum you need in order to cover your costs & start making an ROI. Obviously if you can charge more, you'll start making more.
abrugsch 12y ago
OK, those numbers are a little more favourable. Good to know if i'm ever in that position again.