Post by scepticalinvestor on Mar 10, 2017 10:58:30 GMT
I was pleasantly surprised (but sceptical) to see that PP were offering 3.56% yield on 2 townhouses in Mitcham (South London). It seemed too good to be true, and alas it was.
The offer is essentially two 4-bed townhouses (open plan kitchen/reception/dining area) with a floor area of around 1200 sqft (small/average for a 4 bed house). I looked at the financials and was startled by the assumptions included - a monthly rent of £2,650 per house.
I had a quick look at Zoopla for 4 bed houses in a quarter mile radius of the house -
- 10 houses available (2 houses already let)
- average rent asked is £2250
- the asking rents ranged from £1995 to £2600 (the 2 houses already let were at £2,000)
- almost all these houses were significantly bigger than PP's townhouses
To summarise, I'd be surprised if they got anything in excess of £2,300 (at most) for these houses. There is no dearth of houses available for rent in the area and practically speaking, 4 bed town houses (with their extremely small 4th bedroom in the loft area) are competing with 3 beds as well.
As for the 1.9% void assumption (~5 days in a year), that will probably be blown out of the water just by the few weeks (at least) it'll take to market these properties and get tenants on board! It isn't like a 1-bed flat where you could have tenants move in in a couple of days.
I wish PP actually spent time looking for better value properties rather than playing with figures to project a better yield. It'll only lead to investor disappointment later on.
The offer is essentially two 4-bed townhouses (open plan kitchen/reception/dining area) with a floor area of around 1200 sqft (small/average for a 4 bed house). I looked at the financials and was startled by the assumptions included - a monthly rent of £2,650 per house.
I had a quick look at Zoopla for 4 bed houses in a quarter mile radius of the house -
- 10 houses available (2 houses already let)
- average rent asked is £2250
- the asking rents ranged from £1995 to £2600 (the 2 houses already let were at £2,000)
- almost all these houses were significantly bigger than PP's townhouses
To summarise, I'd be surprised if they got anything in excess of £2,300 (at most) for these houses. There is no dearth of houses available for rent in the area and practically speaking, 4 bed town houses (with their extremely small 4th bedroom in the loft area) are competing with 3 beds as well.
As for the 1.9% void assumption (~5 days in a year), that will probably be blown out of the water just by the few weeks (at least) it'll take to market these properties and get tenants on board! It isn't like a 1-bed flat where you could have tenants move in in a couple of days.
I wish PP actually spent time looking for better value properties rather than playing with figures to project a better yield. It'll only lead to investor disappointment later on.