UK Landlord Forum / Life

I have a 2-bed flat in West Yorkshire (new build 2005) newly tenanted at £420 pcm (housing benefit single mother of 2-year old). 

Service charge and ground rent = ~1300 pa

There's a nursery and primary school right around the corner so tenant could be there long-term (e.g. 10 years while child goes through school)

First question: How attractive is having a potential long-term housing benefit tenant to a potential BTL investor?  

Second question: What is the yield calculation or key considerations for a BTL investor to decide on what price they would pay for the property? 

thanks

Unfortunately, a tenant on housing benefit is often viewed as a disadvantage, because of the risk that the council may stop the benefit with no notice, plus the common practice among councils of advising tenants to stay put when issued with a Section 21 so that you're obliged to waste time and money on the eviction process. Not all landlords look at it this way but a lot do.

A "potential" long-term tenant doesn't really add a lot of value. Your tenant may theoretically stay for a long time because the property suits her and it's not easy to find a place in her circumstances but it's still very early days. Even after a few years she might get a job in another town or meet the man of her dreams and be off at a few months' notice. Realistically, a tenant is not an asset.

Aside from gross yield, an investor will look at the potential for growth in value, likely maintenance costs, local demand - will it rent out quickly and how easily will it sell when I want to get out of it? Then, of course, there's the "faff factor" - is it worth it for a few hundred quid? That depends on how it sits with the rest of the landlord's portfolio.

Out of interest, what factors did you consider when you looked at it in the first place?

Yield calculations are used by some Landlords, I've dealt with a few myself - I always think of them as nincompoops, but they've seen it quoted on HUTH, so they know no better. Of course, you cannot get an accurate prospective yield, as you do not know your outgoings, so all you can do is work it out retrospectively - any other method is simple guesswork, coming up with a %age figure from a crystal ball to make you feel good, or bad, about yourself. I had one Landlord try to talk to me about expected net yield - I guffawed.