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TIME TO INVEST?

  • Almost 5 million UK households now in the Private Rental Sector (office for national statistics Jan 2019)
  • 700,000 homes overcrowded
  • 7.4 million homes unfit for habitation
  • Average deposit required for a first-time buyer in London is now more than £80,000, according to the Nationwide Building Society (which, incidentally is around 200% of the average annual salary in London at £37,804). 
  • It’s projected that by 2020, more people in the UK will be living in the private rental sector than owning or buying their own home.
  • The UK’s PRS is now worth £1.29 trillion following huge growth over the last five years
  • Capital gains of £385 billion in the last 12 months have seen the total value of Britain’s housing stock rise to £6 trillion
  • The growing demand for rental accommodation has driven a 28.3% increase in the number of homes privately rented in a country historically seen as a nation of homeowners
  • The FTSE100 suffered its worst year in 2018 since the financial crisis, falling 12.5%.
  • According to Pricewaterhouse Cooper statistics, there has been a 28.3% uplift in the number of homes in the PRS over the last 5 years, now totalling 5.7 million. That number is expected to reach 7.2 million PRS households by 2025.

With statistics like this, it is very likely that the PRS (Private Rental Sector) will grow even more steeply over the next 5-10 years.  Of course, there are lots of reasons for landlords NOT to buy a rental property; such as no mortgage relief on rental expenses (although you’re still able to offset the vast majority of your costs), 3% additional stamp duty on 2nd homes, and the rising cost of landlord administration (to further increase when the ban on charging tenants for any tenancy services comes into force on 1st June 2019), there is simply still no better way to invest your money than property!

Return on investment remains low in savings accounts and volatile in stocks & shares, accompanied by significantly more mortgage availability for landlord portfolio expansion and options to buy in SIPs or limited companies.  Property has always been a long game for those prepared to do their research, budget carefully and become hands-on landlords. There are still interesting times ahead for savvy investors.

YIELD AND CAPITAL GROWTH CALCULATIONS

If a buyer pays £500,000 (Capital Value) for a property and receives a net income of £18,000 (Yield of 3.6%) the total capital outlay will be recouped in 28 years (Years Purchase).

Let Austin Darcyhelp to calculate your rental yields

 

So how do you calculate the rental yield percentage?

Often for new build properties, you will have to calculate a gross yield because there are too many unknown factors at this time to give more accurate ‘net’ yield. However, we can research similar developments and make assumptions in order to get the more accurate figure, the net yield, for you to work with.

Information required to calculate yields:

  1. The Annual Rent £
  2. LESS an estimate of the cost of a void (empty) period in a year £
  3. LESS the cost of all expenses down to the Landlord

Service charges and ground rents

Agency Fees

Landlord insurances due

Estimate of repairs for the year

= Net Rent £ after expenses

Calculate: Net Rent £ divided by Purchase Price £ x 100 = Net Yield %


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