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I have been renting our 2 bedroom apartment for 3 or 4 years now.
We use it about 5 weeks of the year but despite that our annual rent from holiday lets has been about £5,000 a year (one low year £3,500, last year £7,000). This is after all expenses, except tax (I comply with both Spanish and UK tax laws).
Currently, I reckon i could get about 6% from a building society, again before tax.
So, if i wanted a 6% (pre-tax) income yield, i would be prepared to pay about £84,000 for a 2 bed unit, fully furnished, equipped and ready to let. No black money, and all fees included.
That’s a target price in my area of about €121,000. For investment purposes that would be my buying trigger, especially as i see interest rates declining over the next few years from the current and imminent peaks.
Where I am that’s about 25% less than the more modest asking prices.
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@ashtondav wrote:
I have been renting our 2 bedroom apartment for 3 or 4 years now.
We use it about 5 weeks of the year but despite that our annual rent from holiday lets has been about £5,000 a year (one low year £3,500, last year £7,000). This is after all expenses, except tax (I comply with both Spanish and UK tax laws).
Currently, I reckon i could get about 6% from a building society, again before tax.
So, if i wanted a 6% (pre-tax) income yield, i would be prepared to pay about £84,000 for a 2 bed unit, fully furnished, equipped and ready to let. No black money, and all fees included.
That’s a target price in my area of about €121,000. For investment purposes that would be my buying trigger, especially as i see interest rates declining over the next few years from the current and imminent peaks.
Where I am that’s about 25% less than the more modest asking prices.
Some of the UK banks are offering 6.25% and others more but with restrictions on withdrawal. Lets stick with 6.25%. That would make my target price GBP 80K with 10% transaction costs making the property cost GBP 72K. I think that sentiment will take prices lower in a couple of years.
I was looking at Costa Rica. The prices there are more expensive than Spain but they are pitching at a US market and I think the websites I have looked at don’t know about the credit crunch, or aren’t letting on. 🙄
Given the current US troubles and the weak dollar I bet if you rented in Costa Rica for a year or so getting to know the market you’d pick up some incredible bargains. It’s where my mind wanders these days but I must admit it’s a big step.
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@mike wrote:
I was looking at Costa Rica.
http://www.quatloos.com/traps/costaric.htm
Oooops!! Best stick to Bulgaria 😯
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Ahh but youre not taking into account capital growth on top of that, savings on your own holidays, savings for your relatives holidays and the bragging factor down the local pub!
Come on now, spend 450,000 euros (each) and I have 2 bargains for you!!!!!!!
Everyone buys for their own reasons, not necesarily as a cold investor looking at figures! 😆
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ashtondav:
“We use it about 5 weeks of the year but despite that our annual rent from holiday lets has been about £5,000 a year (one low year £3,500, last year £7,000)”
1) How many weeks in a year ?
2) you mention all cost. Does that include mortgage interest in Spain or Morocco ?
3) If there is no mortgage have you included the opprotunity cost ?
4) What is your gross/net rental yeild ?
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