Advertisement
If you have a new account but are having problems posting or verifying your account, please email us on hello@boards.ie for help. Thanks :)
Hello all! Please ensure that you are posting a new thread or question in the appropriate forum. The Feedback forum is overwhelmed with questions that are having to be moved elsewhere. If you need help to verify your account contact hello@boards.ie

Incredible Yield

Options
2»

Comments

  • Options
    #32
    Hollister11
    Closed Accounts Posts: 5,482 ✭✭✭Hollister11


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


  • Options
    #33
    valoren
    Registered Users Posts: 5,479 ✭✭✭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.


  • Options
    #34
    Michael D Not Higgins
    Registered Users Posts: 7,223 ✭✭✭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.


  • Options
    #35
    [Deleted User]
    Posts: 24,714 ✭ [Deleted User]


    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.


  • Options
    #36
    Michael D Not Higgins
    Registered Users Posts: 7,223 ✭✭✭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%?


  • Advertisement
  • Options
    #37
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭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.


  • Options
    #38
    Lumen
    Registered Users Posts: 31,080 ✭✭✭✭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.


  • Options
    #39
    newacc2015
    Closed Accounts Posts: 2,379 ✭✭✭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.


  • Options
    #40
    [Deleted User]
    Posts: 24,714 ✭ [Deleted User]


    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


  • Options
    #41
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭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?


  • Advertisement
  • Options
    #42
    [Deleted User]
    Posts: 24,714 ✭ [Deleted User]


    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.


  • Options
    #43
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭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


  • Options
    #44
    4ensic15
    Banned (with Prison Access) Posts: 4,691 ✭✭✭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. .


  • Options
    #45
    Lumen
    Registered Users Posts: 31,080 ✭✭✭✭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?


  • Options
    #46
    4ensic15
    Banned (with Prison Access) Posts: 4,691 ✭✭✭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.


  • Options
    #47
    cronos
    Registered Users Posts: 2,719 ✭✭✭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.


  • Options
    #48
    Lumen
    Registered Users Posts: 31,080 ✭✭✭✭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.


  • Options
    #49
    athtrasna
    Closed Accounts Posts: 13,420 ✭✭✭✭athtrasna


    Mod note

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


  • Options
    #50
    Hollister11
    Closed Accounts Posts: 5,482 ✭✭✭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.


  • Options
    #51
    Subcomandante Marcos
    Closed Accounts Posts: 7,683 ✭✭✭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.


  • Advertisement
  • Options
    #52
    NIMAN
    Registered Users Posts: 33,635 ✭✭✭✭NIMAN


    They always say that a crash is a great time to make money, but I suppose you have to have spare money to do that.

    But there was plenty of Irish people with plenty of spare cash sloshing around their accounts immediately after the crash.


  • Options
    #53
    athtrasna
    Closed Accounts Posts: 13,420 ✭✭✭✭athtrasna


    Large overlap with your previous thread. Threads merged

    Mod


  • Options
    #54
    Marcusm
    Registered Users Posts: 10,335 ✭✭✭✭Marcusm


    NIMAN wrote: »
    They always say that a crash is a great time to make money, but I suppose you have to have spare money to do that.

    But there was plenty of Irish people with plenty of spare cash sloshing around their accounts immediately after the crash.

    Or a spare asset or situation; I know of a family which sold a family home in a town in the extended commuter belt just as the bust setting off. THey managed to get a near boom time price and intended to rent for a year before building a one off house outside the town. Price easily fell 60% in that town. THey had been there pre boom but by getting out at the high price they cleared perhaps 10 years post tax income versus what they would have received 6 months later.


  • Options
    #55
    Ray Palmer
    Registered Users Posts: 8,394 ✭✭✭Ray Palmer


    quadrifoglio verde wrote: »
    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

    The difference is the investment may have only been a portion of the value of the property. Instead of investing 130k it may have been 32k and banks were offering BTLs for people with unlike what somebody else said.

    While there is an element of luck in property investment it is very easy to reduce risk of loss and increase possibility of return.


Advertisement