UK Landlord Forum / Life

We are looking at buying our first property at auction.  Its a short leasehold property with 20 years left.  We understand all the pitfalls but this would suit us so the lease is no worries.  However, the property also comes with right to rent out.  How would we calculate the annual yield as there is no value to the property although it will obviously cost us to purchase the remaining lease period and annual ground rent

Genuine question... why do you care about the notional annual yield?

I understand yields. I never use them. I think they are a very blunt instrument for either making yourself feel good, or bad. What matters, at the end of the day (or year) is how much money you have made when you add up all the rent you've received and remove all your expenses and take off the relevant tax... ta-dah, you either have a profitable property or you don't... and you don't know what your expenses will be until you've gone down the path a little bit. Calculating the [gross] yield on abstract figures will give you an abstract %age, and my questions is - what use is that really going to be? Likewise, the yield you calculate at purchase time won't be the same as time goes on... as received rent will, hopefully, go up over the years, but the price you paid will always be the price you paid.

I'm always rather curious why people think yield calculations are that useful to them.

Because the property is listed as 'good for investors" and we were trying to calculate whether or not it would be a good investment for a rental property given that it is leasehold and there is no return on the property at the end of the term

Right... wouldn't most properties at an auction be listed as being good for investors? It's like "deceptively spacious" isn't it?

 :-\possibly?  Thanks for that snipit of advice I'd never thought of it like that. I suppose you're right though when you consider that the details don't even list a bathroom although there definitely is one so I suppose its a case of 'suck it and see' on auction day