Investing in-property-for-cashflow

HAVING YOUR CAKE AND EATING IT – INVESTING FOR RENTAL YIELD AND CAPITAL GROWTH Delivered at the Property Investor Show ExCel London – March 2011

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)

Aim of Seminar
To 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

Locations

Quick Question
Where 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

Simple Yield
Annual Net Rental Income Generated
Current Value of Property
£10,000
£100,000
10% yield

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%

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%

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.

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

Triangle of Fire

Property Triangle of Capital Growth

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

Some Live Property Examples
UK
USA
Germany

UK - “Average” - 2 Bed in Reading
Triangle – none
Price - £175,000
Net rent - £750
Yield reward – minus 1.86%
Prospects for Income and Growth?

UK Income Property Possibilities?
Areas of higher yield – Nottingham
HMO and Holiday Lets
BUT ONLY 1 SIDE OF TRIANGLE IN PLACE AT BEST

Orlando

New York

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]

Germany

Germany
Triangle – in parts of Germany, all 3 in place
Price – 20.000 Euro
Net rent – 2.256 Eur pa
Yield reward [unfurnished] - 6.3%

German Income Property 179,000 Euro 8 Apartment Block Yield 11.1% net Yield Reward 6.5%

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Investing in-property-for-cashflow

by German_Property on Mar 17, 2011

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Investing in-property-for-cashflow — Presentation Transcript