Incredible Yield

Hollister11

I live in Baldoyle, and I have just noticed an incredible yield for a lucky person.
The it's a 3 bed, 3 bath that was bought for 130K a few years ago, and is now renting out for 1650+ a month. That's a 15% yield.

Pretty incredible if you ask me

Lumen

It's not a 15% yield unless 130k is the current value.

</pedant>

Hollister11

Lumen wrote: »

It's not a 15% yield unless 130k is the current value.

</pedant>

Well yearly ROI then. The person is still grossing almost 20K, on a house that cost 130K.

Graham

Hollister11 wrote: »

Well yearly ROI then. The person is still grossing almost 20K, on a house that cost 130K.

Doesn't tell you much unless you know it's current market value. I doubt it's been making that kind of return since it's original acquisition which would have been during a fairly stagnant market.

cronos

Hollister11 wrote: »

I live in Baldoyle, and I have just noticed an incredible yield for a lucky person.
The it's a 3 bed, 3 bath that was bought for 130K a few years ago, and is now renting out for 1650+ a month. That's a 15% yield.

Pretty incredible if you ask me

Plus they may have had to invest in it to fix it up. Even in 2011 that sounds awful cheap.

handlemaster

Hollister11 wrote: »

I live in Baldoyle, and I have just noticed an incredible yield for a lucky person.
The it's a 3 bed, 3 bath that was bought for 130K a few years ago, and is now renting out for 1650+ a month. That's a 15% yield.

Pretty incredible if you ask me

A few years ago people were saying not to buy. Best not to follow the herd

quadrifoglio verde

The best bargain back in 2011 wasn't property. It was the solidarity bonds.
65% over 10 years before tax! Guaranteed without having to lift a finger.
No worry about tenants not paying or your asset being damaged by tenants.
No rrb, no property tax, no calls about a broken washing machine.
Yes the yield looks good. However for a risk free let your money do the work for you, the solidarity bond was the real bargain

CruelCoin

Hollister11 wrote: »

I live in Baldoyle, and I have just noticed an incredible yield for a lucky person.
The it's a 3 bed, 3 bath that was bought for 130K a few years ago, and is now renting out for 1650+ a month. That's a 15% yield.

Pretty incredible if you ask me

Ermahgerd, buy it nao.

Wouldn't happen to be yours or belonging to someone you know?

Hollister11

CruelCoin wrote: »

Ermahgerd, buy it nao.

Wouldn't happen to be yours or belonging to someone you know?

I'm 20 I wish it was mine. No I'm just really interested in property, and I was doing some research last night.

Hollister11

handlemaster wrote: »

A few years ago people were saying not to buy. Best not to follow the herd

If only I was 25, not 15 back in 2011.

PhoenixParker

Look at one beds in the city centre during the same time period.
They were selling for 70-100k in many blocks, attainable rent never went below €700 and these days they're renting for €1100+

Graham

Hollister11 wrote: »

If only I was 25, not 15 back in 2011.

I can't imagine that would have made a huge difference.

You wouldn't have been able to borrow money so would have needed cash.
Yields at the time would have been almost non-existent or declining.
Plenty of people telling everyone else to stay away from property after they'd got burnt.
Similarly, property was seen as a high-risk investment.

I don't know why you're doing this to yourself, you weren't, you couldn't, you didn't. Even if you were and you could your probably wouldn't have.

Move on.

In the mean time, I'm off to calculate how much my imaginary apple shares that I wish I'd acquired in the 80's would be worth

Pkiernan

Hollister11 wrote: »

I live in Baldoyle, and I have just noticed an incredible yield for a lucky person.
The it's a 3 bed, 3 bath that was bought for 130K a few years ago, and is now renting out for 1650+ a month. That's a 15% yield.

Pretty incredible if you ask me

Lucky is buying a winning lotto ticket.
The person who bought this house was probably a hard working individual who is now getting just reward for his efforts.

Hollister11

Pkiernan wrote: »

Lucky is buying a winning lotto ticket.
The person who bought this house was probably a hard working individual who is now getting just reward for his efforts.

I do not mean lucky as in they didn't work hard. I mean right age, right place, right time with money.

PhoenixParker

PhoenixParker wrote: »

Look at one beds in the city centre during the same time period.
They were selling for 70-100k in many blocks, attainable rent never went below €700 and these days they're renting for €1100+

I was tracking a number of places over the years in Cork city, one example is a complex of nice apartments which were selling from between 110k and 125k about 3 years ago with rents never dropping below 850 or 900 euro and now some are renting for as much as 1300 and the sale prices have gone over 160k.

Similar to Hollister if I was in the position I am now two or a little more years ago I'd probably be looking at buying two places not finding it hard to find one that's affordable/worth the cost. Banks were lending then too.

CruelCoin

I bought a house 2 years ago for 105k, now worth 170k. How's that for yields?

My brother who bought at the height of the bubble bought for 285k at the height of the bubble for a smaller house with a smaller garden in the same town now worth 130k, hasn't been to visit!

Any time i mention my house his tears are delicious. "You're a gob****e if you don't buy now, shure they'll only go up" he said.

Who's the gob****e now?

lcwill

I know of an apartment block in Dublin city centre where one beds sold for 90k in 2012 (with rents about 800-850/month) and are now renting at 1400/month and selling for close to 200k.

cronos

CruelCoin wrote: »

I bought a house 2 years ago for 105k, now worth 170k. How's that for yields?

My brother who bought at the height of the bubble bought for 285k at the height of the bubble for a smaller house with a smaller garden in the same town now worth 130k, hasn't been to visit!

Any time i mention my house his tears are delicious. "You're a gob****e if you don't buy now, shure they'll only go up" he said.

Who's the gob****e now?

Don't be too cocky. A large volume of this is luck.

handlemaster

CruelCoin wrote: »

I bought a house 2 years ago for 105k, now worth 170k. How's that for yields?

My brother who bought at the height of the bubble bought for 285k at the height of the bubble for a smaller house with a smaller garden in the same town now worth 130k, hasn't been to visit!

Any time i mention my house his tears are delicious. "You're a gob****e if you don't buy now, shure they'll only go up" he said.

Who's the gob****e now?

Nice brother you are.

As was said you got lucky.

Muahahaha

10-15% yields for investors who bought at the bottom of the market arent all that uncommon, in fact with rents rising past 2007 levels they are actually normal for anyone who bought a unit to let during the 2010-2013 period.

That said the super duper yields are being enjoyed by the foreign property speculators who arrived here with the crash. iirc it was the American firm Kennedy Wilson who bought the entire Gasworks apartment complex right next door to Google. I forget what the sales price was but I remember working it out at the time that they paid circa 120k per 2 bed apartment. These apartments are now renting for almost 3k a month which is 36k per year. That represents a yield of almost 30% a year and they have owned them since 2010. Essentially the first 3-4 years rent would have paid for the investment and now they are in virtual pure profit.

I also know of a property investor who picked up a 4 story above basement and shop level unit not too far from Dublin Castle. He bought it up for a song in 2010- 150k and today the building is likely worth at least a million if not 1.2m. Me and some friends were astoinished by it but the thing is the building was sold by open tender, anyone could bid. It just so happened that it came to market at a time when no-one could get bank loans and even if they could most people were running scared of property as an investment. He picked it up for next to nothing and will get massive yields and capital appreciation from his investment. In fairness to him his timing was something else.

Property isn't bad at the moment if you have the money up front. 3/4% yield after tax, once you are mindful the rent currently is an all time high.

Anyone borrowing to invest in property with minimal deposit is getting into a poor enough investment IMO, that boat sailed 2/3 years ago.

CruelCoin

cronos wrote: »

Don't be too cocky. A large volume of this is luck.

I had the option to buy at the same time he was, but i didn't leap at it like he did.

I took my time, did my research and made my offer when i felt the bottom had been reached, meanwhile scrimping and saving so that i had a deposit redy to go when i needed to move on it.

Luck had nothing to do with it.

Lumen

CruelCoin wrote: »

Luck had nothing to do with it.

Most people who succeed in investment believe that their success is due to skill rather than luck.

There's no way to distinguish one from the other.

Lumen

Lumen wrote: »

Most people who succeed in investment believe that their success is due to skill rather than luck.

There's no way to distinguish one from the other.

There is an element of luck in most things we succeed at but you can't just say there is no skill involved also and that people's decisions influences the outcome.

Lumen

Braylon Glamorous Parrot wrote: »

There is an element of luck in most things we succeed at but you can't just say there is no skill involved also and that people's decisions influences the outcome.

I didn't say there's no skill involved, I said that it's impossible to tell from someone's investment performance what was the relative contribution of skill vs luck.

CruelCoin

CruelCoin wrote: »

I bought a house 2 years ago for 105k, now worth 170k. How's that for yields?

My brother who bought at the height of the bubble bought for 285k at the height of the bubble for a smaller house with a smaller garden in the same town now worth 130k, hasn't been to visit!

Any time i mention my house his tears are delicious. "You're a gob****e if you don't buy now, shure they'll only go up" he said.

Who's the gob****e now?

CruelCoin wrote: »

I had the option to buy at the same time he was, but i didn't leap at it like he did.

I took my time, did my research and made my offer when i felt the bottom had been reached, meanwhile scrimping and saving so that i had a deposit redy to go when i needed to move on it.

Luck had nothing to do with it.

So in 2007 (height of the bubble) you had the option to buy ................ you decided not to.............. than bought 7 years later after scrimping and saving a deposit for 7 years more..... and bought a house for €105k?

You no doubt bought at a great time but the story has more holes in it than cartoon cheese from a mickey mouse episode.

CruelCoin

Augeo wrote: »

So in 2007 (height of the bubble) you had the option to buy ................ you decided not to.............. than bought 7 years later after scrimping and saving a deposit for 7 years more..... and bought a house for €105k?

You no doubt bought at a great time but the story has more holes in it than cartoon cheese from a mickey mouse episode.

I had the deposit ready, decided not to buy, then decided to go travelling for a year, blew it all away in the seedier parts of south-east asia and diving in new-zealand.

When i came back, i then saved for deposit Mk. II.

Not that that's going to remove the chip from your shoulder.

CruelCoin

CruelCoin wrote: »

...............

Not that that's going to remove the chip from your shoulder.

I have no chip on my shoulder bud (not everyone wants to live where you do)
Your story was full of holes

CruelCoin

Augeo wrote: »

I have no chip on my shoulder bud (not everyone wants to live where you do)
Your story was full of holes

Fair enough, didn't give enough details, appologies.

pilly

CruelCoin wrote:

Any time i mention my house his tears are delicious. "You're a gob****e if you don't buy now, shure they'll only go up" he said.

No wonder he doesn't visit. Revelling in someone's bad choice is not a nice trait.

athtrasna

Mod note

Please remember to remain civil and stay on topic when posting.

Hollister11

OP here. One of the apartments which was listed Thursday evening, is rented out already.

valoren

It's yield on cost.

That's a successful investment.

Assumptions are that the asking price was 130k, the deposit required was 10%.
The 'cost' to the investor was thus 13,000.

That the investment now yields 1650 per month, makes it a 152% annual gross yield on their cost.
Assuming that a negligible monthly mortgage repayment on the 130k property would be say 600 a month to service, then the net would be 1,150.

In that case, the net yield on cost would be 106%.

I have ignored taxation for illustrative purposes.

It's like people who made once off investments decades ago in boring, stalwart stocks.
Their dividends today sometimes exceed their initial investment on an annual basis.

When the yield (dividend, rent etc) exceeds your initial capital commitment on an annual basis, then you win at investing.

Michael D Not Higgins

valoren wrote: »

It's yield on cost.

BTLs are never done that way, it's always yield on the value. This allows a homogeneous comparison.

Michael D Not Higgins

Michael D Not Higgins wrote: »

BTLs are never done that way, it's always yield on the value. This allows a homogeneous comparison.

In reality though its your return on investment that matters not comparing the rent to the unrealised value of a house that has increased in price since you bought it.

Michael D Not Higgins

Braylon Glamorous Parrot wrote: »

In reality though its your return on investment that matters not comparing the rent to the unrealised value of a house that has increased in price since you bought it.

The only reason for calculating yield is to use it as a comparison against other investments, other BTLs, etc. In that case, using the current value is perfectly justified.

I don't see how calculating the yield against your input at the start has any relevance to anything. For example, let's say someone bought a 3 bed house 30 years ago for 40k rented out at 2k/month, would a yield of 60% make any sense to anyone or would you value the house at 250k and say the yield is closer to 10%?

Graham

Braylon Glamorous Parrot wrote: »

In reality though its your return on investment that matters not comparing the rent to the unrealised value of a house that has increased in price since you bought it.

That would be daft. It would be sensible to continuously reevaluate the value of the house and assess the potential returns of a similar amount invested elsewhere.

For example, why would you keep €x in a house yielding 7% if there was an alternative investment yielding 10%. Particularly if the alternative offered better security, lower maintenance, workload, taxation, liquidity etc etc etc.

Yield calculated against current value gives you the data you need to make reasonable comparisons against alternative investments.

Lumen

Braylon Glamorous Parrot wrote: »

In reality though its your return on investment that matters not comparing the rent to the unrealised value of a house that has increased in price since you bought it.

It is normal to measure investments by total return on a mark-to-market basis including both income and capital gains.

That way you can compound returns (or calculate annualised returns) easily.

e.g. if your total annualised return is 10%, over 5 years it's 1.05^5 = 1.276 (27.6%).

If your return over 5 years is 27.6% the annualised return is 1.276 ^ (1/5) = 105 (5%).

This also allows evaluation of whether to hold or sell. If your property has a current market value of 1m but is only generating 1% annualised total return, you should be comparing holding that to selling up and buying another investment that will offer more than 1%. The fact that you bought it for tuppence back at the dawn of time is irrelevant.

Past performance is not an indicator of future performance.

edit: wot Graham wrote.

newacc2015

valoren wrote: »

It's yield on cost.

That's a successful investment.

Assumptions are that the asking price was 130k, the deposit required was 10%.
The 'cost' to the investor was thus 13,000.

No bank offers BTL mortgages greater than 75% LTV. When this property was brought, no banks were giving mortgages to BTL investors full stop.

You will find most places use return on investment as rent vs cost to acquire the asset. Its how I have seen it it courses I took in the past and if you read around online about property investments and personally its the most sensible way to look at it imo.

What you are making compared to what you invested yourself. That's why its called return on investment

Graham

Braylon Glamorous Parrot wrote: »

You will find most places use return on investment as rent vs cost to acquire the asset. Its how I have seen it it courses I took in the past and if you read around online about property investments and personally its the most sensible way to look at it imo.

What's sensible about making 3% yield based on the current value of an investment if there's a 12% yield available elsewhere?

If you purchased a house 30 years ago for £100 that's now valued at €800,000 and currently generating €20,000 rent how can calculating the yield on the purchase price give you anything meaningful?

Graham

Graham wrote: »

What's sensible about making 3% yield based on the current value of an investment if there's a 12% yield available elsewhere?

If you purchased a house 30 years ago for £100 that's now valued at €800,000 and currently generating €20,000 rent how can calculating the yield on the purchase price give you anything meaningful?

Its telling you how its preforming compared to what you put into it which for me is a key attribute.

By all means do other calculations like the one described but I wouldn't classify it as an ROI calculation at all.

Graham

Braylon Glamorous Parrot wrote: »

Its telling you how its preforming compared to what you put into it which for me is a key attribute.

How odd. Personally if I have an asset worth €X00,000 I'd rather know

1) how much an €X00,000 asset is making me now
2) how much that €X00,000 could make elsewhere

Anything else is ancient history

4ensic15

Return on investment is used only for projections to compare possible investments. Return on capital employed is used after the investment is made to compare whether the capital employed could be better used in an alternative investment. .

Lumen

4ensic15 wrote: »

Return on investment is used only for projections to compare possible investments. Return on capital employed is used after the investment is made to compare whether the capital employed could be better used in an alternative investment. .

Doesn't return on capital use book value? i.e. taking into account capital appreciation or depreciation?

4ensic15

Lumen wrote: »

Doesn't return on capital use book value? i.e. taking into account capital appreciation or depreciation?

No. It is the profit made on the capital employed. The fact that there are rises and falls in capital values might have some influence of the return. If a house worth 100k made 10k a year and the house rose in value to €200k but still only made 10k the return would be the same but the issue would be could a better return got from €200k in some alternative investment.

cronos

CruelCoin wrote: »

I had the option to buy at the same time he was, but i didn't leap at it like he did.

I took my time, did my research and made my offer when i felt the bottom had been reached, meanwhile scrimping and saving so that i had a deposit redy to go when i needed to move on it.

Luck had nothing to do with it.

So, o mighty crystal ball please tell me, have we reached the top? If not when will we reach the top?

What's this 'research' you did? I think you're replacing luck with skill.

Lumen

4ensic15 wrote: »

No. It is the profit made on the capital employed. The fact that there are rises and falls in capital values might have some influence of the return. If a house worth 100k made 10k a year and the house rose in value to €200k but still only made 10k the return would be the same but the issue would be could a better return got from €200k in some alternative investment.

This is a bit of a semantic discussion, but I can find no online reference to a definition of "capital employed" which values the assets at the original price they were bought for.

Obviously if you are trying to work out retrospectively what your long term investment performance has been, you would take into account both changes in asset values and net income after expenses over that multi-year period, perhaps all the way back to the original asset purchase, but that's a very specific case which isn't particularly useful for a forward-looking business.

What you need to know is: what is the performance projected to be from this point onwards based on the capital as it is currently valued, in comparison with alternative investments you could make by liquidating the assets right now.

For instance, if I'm considering selling an investment property and buying shares in a REIT, the only asset value that counts is what I can sell it for now.

athtrasna

Mod note

We have an investment forum on boards if you want to continue to discuss the semantics of yields etc. Thanks

Hollister11

Did anyone here profit from the property crash. I have seen apartments which sold in 2011 for 80K and neighbouring properties are on sale now for 200K. Nice for those who had access to cash and credit. I also saw another house which sold for 375 and 2013 and sold last year for 715.

Subcomandante Marcos

Hollister11 wrote: »

Did anyone here profit from the property crash. I have seen apartments which sold in 2011 for 80K and neighbouring properties are on sale now for 200K. Nice for those who had access to cash and credit. I also saw another house which sold for 375 and 2013 and sold last year for 715.

Anyone who has liquidity at the time immediately after the crash and snapped up properties in Dublin, Cork or Galway in the following few months and years had probably flipped them for a massive profit.