P
PeterD_
New Member
Hi,
I'm looking at becoming BTL owner.
I did some research and calculations.
I've assumed 400k property with 2k rent (I've looked at Canary Wharf as an example, though it seems fairly standard in London). I assume zoopla rents (where I took my 2k estimate from) don't include utilities or council tax.
Calculations assume owning property through LTD as I'm a higher-income taxpayer.
I would be putting 100k deposit. Usually, BTL mortgages require a higher deposit. I've added an accountant fee, I probably could do it myself, at least from year 2.
Overall it appears I would have a negative yield of £-350 per month. £-4100 per year.
Still, my calculations don't include any agent fee. As far as I know, estate agents charge ~20% of rental income for managing property. I assume most investors manage it themselves (viewings, advertising, queries from tenants, deposits etc.)?
Are my calculations and assumptions correct? Why do I arrive at a negative yield? Is it that most investors keep putting into the business with potential property value gain being the reward? What would I need to do to make this profitable? Find a much better property price-to-rent ratio? Look outside London (I would need to pay 20% to rental/estate agent then)?
I'm looking at becoming BTL owner.
I did some research and calculations.
I've assumed 400k property with 2k rent (I've looked at Canary Wharf as an example, though it seems fairly standard in London). I assume zoopla rents (where I took my 2k estimate from) don't include utilities or council tax.
Calculations assume owning property through LTD as I'm a higher-income taxpayer.
I would be putting 100k deposit. Usually, BTL mortgages require a higher deposit. I've added an accountant fee, I probably could do it myself, at least from year 2.
Overall it appears I would have a negative yield of £-350 per month. £-4100 per year.
Still, my calculations don't include any agent fee. As far as I know, estate agents charge ~20% of rental income for managing property. I assume most investors manage it themselves (viewings, advertising, queries from tenants, deposits etc.)?
Are my calculations and assumptions correct? Why do I arrive at a negative yield? Is it that most investors keep putting into the business with potential property value gain being the reward? What would I need to do to make this profitable? Find a much better property price-to-rent ratio? Look outside London (I would need to pay 20% to rental/estate agent then)?
| LTD | |
| Outgoing | |
| Property price | 400000 |
| Stamp duty (3%) | 12000 |
| Deposit | 100000 |
| Mortgage | |
| Mortgage amount | 312000 |
| Morgage rage % | 3.70% |
| Mortgage monthly | 1550 |
| Incoming | |
| Rent | 2000 |
| Vacancy (10%) | -200 |
| Renovations (10%) | -200 |
| Insurance | -50 |
| Accountant | -50 |
| Service charge + ground rent | -300 |
| In before tax | -350 |
| Tax | 0 |
| Total in | -350 |
