Investing in UK Property
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They’re offering yields as low as 4%, masking the properties’ true returns with "discounts".
This gives the investment the false appearance of being viable. What's even worse is that these companies demand thousands of pounds in finder's fees for sourcing these investments.
As an investor, the first question you need to ask yourself before investing in property is,
“Will This Investment Make Me Money?”
One of the ways to answer this question is to calculate the anticipated yield of the residential investment property.
You’ve most likely heard property investors use the word "yield".
However, what exactly does it mean?
"Yield" is an extremely important concept to grasp. The yield indicates to an investor the anticipated earnings on an investment, or the rate at which the investor will earn money from the investment. All other things being equal, the higher the yield, the more attractive the investment is.
You must aim for a yield that is at least 2% above your borrowing costs in order to cover your mortgage payments and other property-related costs.
Here’s an example of how investors calculate a gross yield when investing in property in the UK.
Divide the yearly rental income by the purchase price. Then multiply that amount by 100. This is your gross yield.
Let’s say that you’ve just seen a potential UK property investment advertised for £140,000, with a monthly rent of £650.
ExampleThe gross yield for this investment is 5.6% Yearly rental x 100 = gross yield £7,800 x 100 = 5.6% |
The gross yield calculation is a quick way for investors to compare returns on investing in property with returns on other forms of investment.
However, you need to break down this calculation for a more in-depth analysis of the true costs and income associated with investing in rental property.
| Rent per year | £7,800 |
| Less | |
| Mortgage interest (6%) | £7,140 |
| Management 12% plus V.A.T | £1,099 |
| Buildings insurance | £240 |
| Repairs say at 5% of rent | £390 |
| Landlord's yearly gas certificate | £70 |
| Void period say one month | £650 |
| Total reductions | £9,589 |
| Total loss | £2,449 per year |
That's right… notice how in this example you had a total loss of £2,449 for the year, even though you started with a gross yield of 5.6%. In this scenario, you've basically paid for the tenant to remain in your property for the year.
In most parts of England, yields on UK property investment are now around 5%. In Southern England it’s even worse, with yields around 4%. In most major UK towns, yields are now as low as 3-4%.
North East of England and Buy to Let in Scotland are currently the only places that offer a decent return when investing in property in the UK. In those two places, yields are around 7-8%. Property prices in these areas are rising rapidly because of the demand from first-time buyers and buy-to-let investors.
If you're interested in finding properties in these areas and paying below market value then I recommend you sign up to Alan's free course which normally sells for £199.
Through his course I've bought many properties paying virtually no deposits.
This course will teach you the 7 Fatal Mistakes to Avoid as an Investor!
Also check out this ebook that explains how to buy properties with no money Click Here!
Return from Investing in Property UK to Investment Property Strategy
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