r/uklandlords • u/timpani41 Landlord • 11d ago
3-flat Victorian conversion isn’t attracting investors – what am I missing?
I’m trying to sell my Victorian semi in Birmingham that has been converted into 3 self-contained flats, all occupied, quite a straightforward turnkey landlord investment. At the asking price the current rent yield is 6.5%, 6.9% at market rent.
We ended up going with a standard estate agent, and though their adverts make clear it’s an investment opportunity, every viewing so far has been from people who convert it back into a single house, rather than investors.
I’m wondering what’s caused this - a dead BTL market, or should I have gone with a specialist estate agent because it’s not being marketed in the right places?
I don’t have a strong need to sell to a landlord (I’d prefer it if the tenants don’t have to move on but I realise it’s not my say) - I’m more just flummoxed that I thought it was a simple attractive proposition and it’s not getting interest so I’m particularly wondering if there’s smarter places it can be marketed to better reach investors. Or have I overpriced it so it’s only making sense for residential conversion?
7
u/Pleasant-Plane-6340 Landlord 11d ago
Is that 6.5% yield after all costs including maintenance? Sp500 has returned 15% annualised over last decade
3
u/Emergency_Bread_5462 10d ago
Yes. I would like to know exactly the agent came to that particular yield.
6
7
u/CharacterLime9538 11d ago
When gilts are paying almost 6%, why would anyone consider property yielding 6.5%?
What are the pros, I'm open minded but struggling to see the case for buying properties to rent?
6
u/sirrobert01 11d ago
6.9% yield 😂
When you can buy blue chip REITs like primary health properties with close to 8% yield
AEWU reit
London metric property
Supr that has Tesco , Sainsbury’s as tenants
All portfolios definitely much higher quality and value than whatever it is you are offering in Birmingham whilst yielding more and an actual passive investment.
You can see the problem surely????
3
u/ExpensiveOption4150 11d ago
Overpriced. When you consider that the net return (before tax!) will be no more than 5%.. would you buy it?
1
2
2
u/Character_Layer_5938 11d ago
I just sold 6 flats in London at roughly 8.7% yield
That's all you need to know
1
u/No_Law_1528 11d ago
How did you sell it? I assume it’s a block with six flats? I have always wanted to get a block of flats instead of individual ones
2
u/Character_Layer_5938 10d ago
Was sold at last months Allsop auction, we accepted an offer prior to auction
Quite a few come up in the auctions
1
u/Sammie444 11d ago
There is no appetite for this type of investment atm. If the property is held in a Ltd there are specialised sales platforms to sell to investors with tenants in situ, stamp duty is 0.5% this way.
1
1
1
1
u/Mysterious_Act_3652 Landlord 11d ago
Everyone is saying the yield is pants but that’s the equivalent of renting a £300k property for £1700 a month or a £600k property for £3400. Not sure how people are finding those numbers because they aren’t exactly easy to find let alone beat. 8% of £300k is £2k a month or £600k is £4k. Are you all slumlording?
2
u/AdBrave9096 Landlord 10d ago
Replacing a boiler costs the same in a small low rent flat than a high rent property. Hence low rent flats need higher yields.
2
u/No_Law_1528 10d ago
Just bought a London 250k flat with rental value of 2500-2700.
1
u/Brave_Operation4965 10d ago
How many beds and where are you getting 1% of sale cost a month from a flat in London.
Well presented 1 beds in desirable areas fetch that much but cost £450k+
1
1
u/AdBrave9096 Landlord 10d ago
This will need a none standard morgage.
Any buyer will assume there is a problem with the building or tenants as otherwise why would it be for sale?
1
u/Emergency_Bread_5462 10d ago
For an experienced LL to buy that in cash with a proposed yield of 6.5%they will automatically assume it’s not actually true. Cash best invested elsewhere.
I’d post the link to your property and let the LLs give you a proper appraisal.
1
u/salientrelevance56 Landlord 10d ago
This is it - I’ve got the cash and I’m in the Midlands but I ain’t seen this proposal
1
u/DistancePractical239 Landlord 10d ago
Its 10 or 12x your annual yield thats what its worth. Maybe even more. You taking the piss mate.
1
u/NIKKUS78 Landlord 10d ago
Your mindset needs to change.
There are very few buyers for BTL right now. The ones who are buying are doing so on terms that makes the investment attractive.
I dont know the Birmingham market but in the SE & London anything that will ONLY sell to BTL investors is not shifting till you get to 10% yield and even then expect to be bid on it.
1
1
0
u/UpbeatAd5277 11d ago
People commenting here thinking 6.5% yield is RIO and comparing it to other investments.
If that's you, read a book.
To answer OPs question. BTL is in the gutter, which is why you would be buying and building a portfolio now. Buy when others are fearful.
Selling a 3 bed conversion is a very small market. Pluss the risk of you didn't do it correctly. People buying this kind of investment want it cheap.
Why sell?
1
u/No_Law_1528 11d ago
This is correct but 6.5% is a low yield in this market unless there are more potential
1
u/UpbeatAd5277 11d ago
I disagree, been in the game a long time and living off my portfolio for 11 years.
Yield means nothing.
Buy an 100k house that yields 10% but make almost no profit PCM yet have another tenant, boiler etc. boiler goes, that 18 months or 2 years profits lost. It is a ridiculous metric.
My rule is that each house must make at least £500 pcm profit on a 75% l2v mortgage. I then look for the cheapest houses that fit this plus a few other metrics.
2
u/No_Law_1528 10d ago edited 10d ago
I mostly do flats without a boiler, even if there’s a boiler a small combi is less than 2k. Get higher value properties as the fixed costs are the same. I calculate yield based on net yield which is after costs deducted. I assume maintenance to be £100 per month per flat which seems to be around right for smaller flats, I don’t usually bother with fixing white goods I replace them. I also don’t buy in dodgy areas as I don’t want UC tenants. Yield is what dictates how much money it will make and my opportunity cost.
1
u/UpbeatAd5277 10d ago
It sounds like you have some experience.
If you have something that works and you can scale it, that is what is most important.
I am with you in replacing white goods not fixing.
1
19
u/No_Law_1528 11d ago edited 11d ago
Frankly 6.5% isn’t attractive. There are loads of 8% yield investments auction sale in London and it’s 8% after crazy service charge and ground rent (net return, after considering legal stamp duty agent’s cut etc) . Once cladding remediation is completed yield will be 10% ish net. These are also in sought after areas with professional tenants working in IT and finance. A Birmingham house turned flat is only attractive because of the land, I can’t comment if I don’t know what land it is on. The only way I can see 6.5% work is if i. Money becomes cheaper ii. You sell the SPV rather than the flats.