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I am a relatively inexperienced property investor.
I have noticed that there are currently a lot of companies offering guaranteed rental yields. These yields seem high if I am to believe what I read in the press as to current rental yields.
Do any users of this forum have experience of acquiring properties with guaranteed yields? |
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Always check the true rental income and the rentability of the area. To me this is key.
Can anyone recommend any companies? |
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Owen,
As an experienced investor, I am very cautious on these new developments............
Yields tend to be low and the only reason they can afford to pay these guaranteed yields as the properties are priced to high to begin with.
Bob |
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When buying off plan researching the rentability of the area is the most important factor.
FS |
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I look for properties where I get a good discout. Some developers are offering up 20% discounts at the moment. Sounds good to me. |
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Discounts mean nothing. Most developers over price properties so they can offer a so called discount.
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Thomas,
Many property developer are building 'new build schemes' in areas where there are no great comparables. They then price the units at 10% over the real value. Next they offer these properties '..for a short period only at a massive 10% discount....' does this really sound like a great deal?
Don't be fooled.
FS |
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Thanks everyone for your responses. I will definately be more prudent after hearing your views.
Owen |
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What did you decide then?
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Please be careful choosing the schemes. Some are great others are way over priced. |
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From what I have seen recently, almost all developers offer a discount of some sort. Are they just panic-selling and want to shift them asap, or are there any GENUINE descounts to be had?
Can anyone even recommend a good developer in the North East?
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I think the term "discount" is bounded around in off-plan far too much.
It all comes down to doing the research- only we the investors can determine whether it's BMV or not! |
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'BMV' will always be a grey a grey area. There are too many factors to make it a science. Except for new builds, perhaps, where they are carbon copies.
Older houses will have taken on a certain character over the years with renovations etc, and so distinguish themselves from others in the same street, even next door.
I am lookig to put a property up on this site and have been working out rough values for it. You wouldn't believe the differences in valuations (unofficial) I have been told, it's astounding.
It's a £50k property and I had quotes between £40k and £85k. What to do? I think let an agent do a proper valuation rather than rely on guess work and my own research- will save me a small fortune I think!
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Beware of Developers taking a huge deposit for property not scheduled for completion for many months - Galliard do this - allegedly because they only want to attract serious buyers/Investors...
Ask any friends you have who work in big financial Institutions about Overnight Markets... Basically, people with short term cash holdings - for example large retailers can Invest their "cash" for a quick gain... then once you see how lucrative this is, you will realise why developers are keen to "sell" offplan for high deposits with long completion dates... ;-)
Secondly, Check out the local market... as an example, Manchester has gone through an amazing transformation in recent years, rejuvenated and revitalised, BUT... the developers have focussed almost entirely on city centre loft/warehousey type city centre developments which the local people can significantly not afford... I have seen discounts on £300,000 apartments which would buy you a terraced house, and leave you cash to spare because buyers cannot be found for new build properties.
These are often flats sold to out of town investors who are promised guaranteed rental yields for 1 year or 2 years... As posted earlier, the canny developer adds the rental to the asking price, then effectively gives you back what you have overpaid as "rent".. Often these companies make no effort to rent out the property, as they are not interested!! - this is apparently a selling point!! as your 1 year old ex rental property may still be pristine and unused when you take over control 12 months later!!
In reality, maybe 50 - 100 (obviously depending on size of development) flats come on the rental market, all on the same day. Canny renters are able to haggle £100 pcm discounts on quoted rentals, and often more, leaving buyers with high mortgages, not being covered by rental, and in some cases I have seen, negative equity..
Im sure it's not like this for everyone, but I have seen too many recently, and it beggars belief how stupid people become when theres "profit" on the line..
As they say, If it seems too good to be true, it probably is.... |
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Owen,
I would say you need to do a lot of homework to be absolutely certain that a new build is in fact a bargain. I'm a relatively new investor but have found nothing can beat a period terraced house in . Often, even a single person can afford the rent, it is possible to find them in stamp duty exempt areas, there is no ground rent or service charge and you are entirely in control. As freehold properties, the legal fees tend to be lower because leaseholds can be a nightmare and you don't have to worry about dwindling lease periods. |
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Hi Liz
Where abouts do you buy your terraced houses out of interest?
Will |
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agreed, where is this magical place Liz? i hate secrets. |
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Hi Will, Stephen,
I operate in Birmingham but also have properties in Devon and, imminently, London. I concentrate on regeneration areas. In the summer I bought a Birmingham two-up two down for £86,000 which lets for £425pm. An agent found me the tenant. I manage myself and make £125 pm because I got a mortgage at 4.89% fixed for a year. However, I only bought the property because as well as being stamp duty exempt it also has a piece of land - small but developers seem to be able to build a whole block of flats on a postage stamp - on which I intend to build a house or 2x small 1-bed flats when I have more dosh. The area borders a smarter one where prices are sky high. So I'm happy to sit and wait for capital appreciation. 2 weeks ago I had been about to buy a nice little 'ready to let' 2-bed house, no stamp duty which I negotiated down to £95k but it so happened I got an opportunity to at last get a foothold in London (also no stamp duty) so reluctantly had to back out. |
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Liz,
I am also looking in London. Where do you find these 'regeneration areas' are there any websites you can recommend? I read recently that the government is pumping £22bn into regeneration of different sorts.
Piggy-backing on just some of this money has got to be the way to make solid gains from capital growth. |
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Hi Jo,
A property sourcer found it for me for a fee. She's Lysa_kelly@yahoo.co.uk. |
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Thanks all.
I am sure no-one will be surprised that I have not changed my mind and will be staying clear of guaranteed rental yields until and am more experienced. I am sticking with traditional rental properties and am looking to make a purchase through this site very soon.
Owen |
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Im offering a 6.1% guaranteed rental return over the next 12 months on my £295k city centre flat - £1,500 per month for 12 months guaranteed for 12 months is obviously of use for some landlords, maybe first timers, or we can just give them an £18k discount off the price of course.
So I think that it depends where you are on your "cycle" ie first timers, or experience landlords have different needs.
For me right now, its about buying property with no money down (or as little as possible) as I know I can rent everything we lay our hands on.
For others, they may have the deposits available, but just want that little bit of security for the next year with a guaranteed rental income.
I think the problem comes with buying new off plan stuff, as you may be competing with another 100 flats all completing at the same time.
As always, theres a time and place for such deals, you just need to be sure its the right deal for you at this time.
Hope this helps !
Dan |
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Hi. i agree with Dan, it all depends on where you are as a invester, a new invester or a old well heeled invester, but i always say the rentat market is like the selling market, a rental property is only worth what a tenant will pay for it,
Dave |
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Yes, I prefer to buy from similar "amateur" landlords to myself - hence avoiding the salesmen pushing guaranteed rental yields on new builds (which is broadly why I hang around this site!). I'm not saying there aren't bargains to be had from such opportunities if you shop around, I just need to build up more experience / contingency before risking getting my fingers burnt!!
Julie
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