I am a newbie in real estate investing. I have two properties in Greater London, UK by accident and keen to do more.
Most of the podcasts and forums here talk about 1% or 2% rule. That doesn't seem to work by any stretch of imagination here in the UK, specifically for Greater London. For example, 2 bed house costs £300,000 and rents for £1,200 per month. Is there a different rule of thumb seasoned investors use for Greater London, UK ... OR ... Am I missing something?
Greater London Newbie
Ultimately you want to find a market that makes sense and has a solid economy. The price you mentioned above reminds me of where I grew up in Southern California. Wholesaling may be a better objective for you to do. Or even commercial real estate. If you don't mind me asking what would be the price of a 4 unit apartment complex in your area? what would it rent for?
Hi Gerald - Thanks for your reply. I don't know the price of 4 unit complex. I am thinking more like buying a single flat/apartment or house. In the area I am looking it would cost £150,000 to £200,000 and would rent for £800 to £1,000 per month. Would you invest with these kind of numbers? Most investors in London make their money through capital appreciation. However, I am not comfortable depending on just that.
In London you want to think about annual rental yields. A net yeild in London would be about range from 2.75% to 3.75% (note this is net not gross). There is a nice little example how to calculate yields near the bottom of this blog: buy to let guide. Prices have gone up a lot recently and rentals have been slower to catch up so yields have dropped a bit. So with your £300,000 example your gross yield would be 4.8%. The net yield would depend on all your costs but would be in the range above.
Hope this helps.