Download - Investing in-property-for-cashflow
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HAVING YOUR CAKE AND EATING IT – INVESTING FOR RENTAL YIELD AND CAPITAL GROWTH
Delivered at the Property Investor Show ExCel London – March 2011
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Who Are We?
Mat Littlecott – ProVenture Property
(Private International Investor and Consultant)
Susanne Weise - ImmoSence
(Germany-Based Management Specialist)
Markus Ponitka - Deutsche Bank
(Germany-Based Finance Expert)
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Aim of SeminarTo make this the most valuable and interesting 30
minutes of your day, providing new perspectives to
investment
Scope:
Discuss where money is made in property
Monthly cashflows Vs capital gains
Examine trends in capital price appreciation – using yield
Look at markets – UK, USA, Germany
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Locations
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Quick QuestionWhere is most of the money made in property,
monthly rental income or increase in property value?
Capital Value increases, especially if leveraged
[by 500% in my case, over last 20 years]
BUT! - Monthly rental yield is a great indicator for when capital increases occur
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Simple Yield
Annual Net Rental Income Generated
Current Value of Property
£10,000
£100,000
10% yield
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Yield Break-Even Point
Residential Property
Unfurnished Property = Finance pay rate +2%
Furnished Property = Finance pay rate +3%
Houses for sharers / students = Finance pay rate +4%
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Yield Break-Even Point For UK
Residential Property
Unfurnished Property = 5% +2% = 7%
Furnished Property = 5% +3% = 8%
Houses for sharers / students = 5% +4% = 9%
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The Yield “Reward”
Yield Reward = Net Yield – Yield Break Even Point
A Yield Reward of 0.1% means money starts going into your pocket!
This is important, to ensure interest rate conditions and running costs are accounted for.
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Graphs Are based On
Prevailing rates for investment new 5 year fixed mortgages, in each year
Net Rental figures for a given property House Prices as taken from public records
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Triangle of Fire
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Property Triangle of Capital Growth
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Capital Growth Triangle
Identifies when next period of growth could occur Favourable finance conditions Positive Yield Rewards Confidence in the market
– Unemployment stable or decreasing
– Stable prices for a period
– Population stable or increasing
– Economic factors favourable – GDP > inflation
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Some Live Property Examples
UK
USA
Germany
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UK - “Average” - 2 Bed in Reading
Triangle – none
Price - £175,000
Net rent - £750
Yield reward – minus 1.86%
Prospects for Income and Growth?
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UK Income Property Possibilities?
Areas of higher yield – Nottingham
HMO and Holiday Lets
BUT ONLY 1 SIDE OF TRIANGLE IN PLACE AT BEST
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USA
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Orlando
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New York
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USA Condo
Triangle – yield reward of 6% [finance at 7% is possible]
Price $31,200 [sold for $304k on 1 Dec 2007!!]
Net rent $ 400 [Gross Rent $900]
Yield reward [unfurnished]
Prospects for Income and Growth?
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Germany
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Germany
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GermanyTriangle – in parts of Germany, all 3 in place
Price – 20.000 Euro
Net rent – 2.256 Eur pa
Yield reward [unfurnished] - 6.3%
Prospects for Income and Growth?
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German Income Property
179,000 Euro8 Apartment BlockYield 11.1% netYield Reward 6.5%
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