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Investing in-property-for-cashflow


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Capital growth & cashflow - is that too much to expect? Markets identified where you can find both. By looking at yield reward, one can evaluate property investments and can identify areas to invest in property. This presentation from the Property Investor Show at ExCel, London in March 2011 was delivered by Mat Littlecott from ProVenture Property - an investment and property consultants based in the UK and in Germany. More information on the services that ProVenture Property can offer investors can be found at

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Investing in-property-for-cashflow

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