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SPV34
Dec 21, 2015 13:08:23 GMT
Post by Financial Thing on Dec 21, 2015 13:08:23 GMT
The Chartered Surveyor explained:
"Developers are buying a £100k house, adding a bed in the lounge, / dining room, apply to the local authority for a license as an HMO and getting a surveyor to value it at £150k. Typically a funder will lend £120k against it. Along comes the buyer thinking they will be receiving a high yield rate on the HMO but the HMO occupants tend to treat the houses poorly, leaving them trashed with high repair costs. Occupancy rates can be low. Now that same house is only worth £80k in real terms with £120k outstanding against it.
When the market tumbles (I believe within 1 year), people will lose money on all these overvalued properties. I will keep you posted."
Makes sense to me but take the info. for what it's worth.
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j
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SPV34
Dec 21, 2015 13:21:52 GMT
Post by j on Dec 21, 2015 13:21:52 GMT
The Chartered Surveyor explained: "Developers are buying a £100k house, adding a bed in the lounge, / dining room, apply to the local authority for a license as an HMO and getting a surveyor to value it at £150k. Typically a funder will lend £120k against it. Along comes the buyer thinking they will be receiving a high yield rate on the HMO but the HMO occupants tend to treat the houses poorly, leaving them trashed with high repair costs. Occupancy rates can be low. Now that same house is only worth £80k in real terms with £120k outstanding against it. When the market tumbles (I believe within 1 year), people will lose money on all these overvalued properties. I will keep you posted." Makes sense to me but take the info. for what it's worth. Very plausible reasoning, esp if this was done as say a private hmo landlord with little experience. One would hope though that with pm, thc et al, these guys act as professionals or leave the management to trusty professionals who take this business seriously as their reputation & livelihood is on the line as much as the investors' money is. The hmo & even normal btl properties on those sites come across as well researched. Whilst I personally think the capital growth part is a bit exagerrative at times, the plus with hmos is the smoothing effect on yields with any voids & higher valuation as an invesment vehicle, not just btl. But, you are absolutely correct that propery values will most likely dip (my thinking as well, hence why diversifying into hmos more) so that will ahve an effect. Long term though, the picture is likely to be different(hopefully). Until it happens, it's very difficult to argue against either view.
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SPV34
Dec 31, 2015 18:19:12 GMT
Post by Financial Thing on Dec 31, 2015 18:19:12 GMT
My surveyor friend confirmed the valuation for this property in lettable condition is spot on at £80k. So it appears the numbers are good on this property.
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ben
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SPV34
Dec 31, 2015 21:53:20 GMT
Post by ben on Dec 31, 2015 21:53:20 GMT
think the current valuation of properties will be about right, as they are not valuating it themselves, its the projected value that is probably a bit wishful thinking
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j
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SPV34
Dec 31, 2015 21:55:36 GMT
Post by j on Dec 31, 2015 21:55:36 GMT
My surveyor friend confirmed the valuation for this property in lettable condition is spot on at £80k. So it appears the numbers are good on this property. I've just re-read the details properly & it looks like another spv underwritten for lower guaranteed rent for 2 years by an rental agent. I wonder if that's the way pm see themselves going or just coincidence that the last few projects have come as underwritten? This method has positives & negatives as you're guaranteed a specific amount for 12-24 months with no voids, but you pay a big premium (a friend of mine last year told me that a btl he has usually rents for about £575-£600 pm & he was offered £425 by a national estate agent at best, whilst giving them 1 month to find tenants in the process, ie they pay £425 rental after 2nd month of agreement). That's 25%+ less! It does eat a lot into your profit & eauates to having the property empty for 3 months which for an outfit like pm seems drastic-case scenario to me
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ben
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SPV34
Dec 31, 2015 22:46:49 GMT
Post by ben on Dec 31, 2015 22:46:49 GMT
does look like they seem to be going down that route not so sure if better or not, suppose will have to see to compare with some of the other properties over a bit of time
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adrianc
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SPV34
Jan 2, 2016 16:18:32 GMT
Post by adrianc on Jan 2, 2016 16:18:32 GMT
That's 25%+ less! It does eat a lot into your profit & eauates to having the property empty for 3 months which for an outfit like pm seems drastic-case scenario to me <cynical> Depends on the commission arrangement you might have, outside of the SPV, with the rent guarantor/agent.
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ben
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SPV34
Jan 2, 2016 17:15:36 GMT
Post by ben on Jan 2, 2016 17:15:36 GMT
Suppose it comes down to if you like the figures or not, the last two seem to be ok to me. Read somewhere the average on a BTL is about 6% a year, which is about what I get for mine although I have not increased rent for awhile as have had good tenants
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littleoldlady
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SPV34
Jan 2, 2016 17:44:18 GMT
Post by littleoldlady on Jan 2, 2016 17:44:18 GMT
Read somewhere the average on a BTL is about 6% a year, which is about what I get for mine although I have not increased rent for awhile as have had good tenants I doubt that 6% against the current value (as opposed to the price paid at purchase) is possible after all costs and average void periods , certainly not in the southern half of the country or in the higher price regions in the north. In London 2% is nearer the mark. It is impossible to increase rents at the same rate as property prices when they take off.
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hazellend
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SPV34
Jan 2, 2016 18:27:39 GMT
Post by hazellend on Jan 2, 2016 18:27:39 GMT
London yields are much higher than 2% unless you pay a very toppy price for a central flat. Property partner have quite a few with net yields over 3% after all costs, voids, tax taken into account.
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ben
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SPV34
Jan 2, 2016 19:19:42 GMT
Post by ben on Jan 2, 2016 19:19:42 GMT
not much more left to go with this one I wonder how many of there Christmas vouchers they sold
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littleoldlady
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SPV34
Jan 3, 2016 15:48:54 GMT
Post by littleoldlady on Jan 3, 2016 15:48:54 GMT
London yields are much higher than 2% unless you pay a very toppy price for a central flat. Property partner have quite a few with net yields over 3% after all costs, voids, tax taken into account. How can it possibly be after all voids and costs are taken into account when these are in the future and so unknown? Either they are PP predictions which may be wrong or they are being guaranteed by somebody in which case how reliable is the guarantor? Also remember that the yield will automatically fall if property values increase faster than rents as has been the case for decades. Most landlords are not getting the yield they think they are because they are using the price they paid rather than the current value.
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j
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Post by j on Jan 3, 2016 16:39:34 GMT
Most landlords are not getting the yield they think they are because they are using the price they paid rather than the current value. Not a landlord myself as such bar having a few small shares in the likes of thc & pm but, I would calculate my yield based on the original price paid. If a capital gain becomes material, that is a bonus. The only time I would calculate differently is if there is a capital los (reduction on original price paid)
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littleoldlady
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SPV34
Jan 3, 2016 17:32:32 GMT
Post by littleoldlady on Jan 3, 2016 17:32:32 GMT
Most landlords are not getting the yield they think they are because they are using the price they paid rather than the current value. Not a landlord myself as such bar having a few small shares in the likes of thc & pm but, I would calculate my yield based on the original price paid. If a capital gain becomes material, that is a bonus. The only time I would calculate differently is if there is a capital los (reduction on original price paid) IMHO that is economic illiteracy. Suppose you bought a house before the war for £500 and you are now letting it for £5000 pa would you call that a yield of 1000%? You have to base the yield on the opportunity cost of the current value, where else you could invest it.
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hazellend
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SPV34
Jan 3, 2016 18:23:40 GMT
Post by hazellend on Jan 3, 2016 18:23:40 GMT
Most landlords are not getting the yield they think they are because they are using the price they paid rather than the current value. Not a landlord myself as such bar having a few small shares in the likes of thc & pm but, I would calculate my yield based on the original price paid. If a capital gain becomes material, that is a bonus. The only time I would calculate differently is if there is a capital los (reduction on original price paid) Property partner calculates the yield on the current property value so the yield drops as the price rises. Despite good gains on a lot of their properties they are still getting 3 - 4% net yields in London and the south. If the tenant was to default or the property could not be rented the yield would drop so there is no guarantee, just like with any rental properties.
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