Author Topic: 1% rule in the UK  (Read 3421 times)

kt

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1% rule in the UK
« on: March 17, 2014, 01:23:00 PM »
I've come across the 1% rule re: rental properties a few times this week and was wondering if it applies everywhere, specifically in the UK. I'm not looking to invest in the rental market at the moment, I'm just curious.

The areas I'm currently looking to live max. rent is 750 / month with property prices starting at 75,000.
However, that 750 / month is on a property which would be around 139,000 and the 75,000 properties rent out at about 425.

I seem to be seriously missing something!

KingCoin

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Re: 1% rule in the UK
« Reply #1 on: March 17, 2014, 02:03:28 PM »
I've come across the 1% rule re: rental properties a few times this week and was wondering if it applies everywhere, specifically in the UK. I'm not looking to invest in the rental market at the moment, I'm just curious.

The areas I'm currently looking to live max. rent is 750 / month with property prices starting at 75,000.
However, that 750 / month is on a property which would be around 139,000 and the 75,000 properties rent out at about 425.

I seem to be seriously missing something!

The 1% rule dictates what might be considered a good investment, it isn't some sort of universal law (i.e. all properties rent for 1% of their purchase price). Even within the US, rent can vary extremely widely across locations. This is out of date, but should give you and idea:
http://www.realestateanalysisfree.com/blog/real-estate-analysis/price-to-rent-ratio-rental-yield-of-all-us-states

If rent is low in your area, it's probable that buying rental properties isn't a great idea, though you'll have to take into account any number of variables including investment opportunity set, prevailing interest rates, the particulars of the property location etc. Like all rules, the 1% rule is just a starting point. 

warfreak2

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Re: 1% rule in the UK
« Reply #2 on: March 17, 2014, 02:31:15 PM »
In the UK, the tenant pays council tax, as well as paying rent. AFAIK, in the US, the equivalent tax is paid by the landlord, hence US rents include that cost while UK rents don't.

daverobev

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Re: 1% rule in the UK
« Reply #3 on: March 17, 2014, 03:07:24 PM »
UK vs US:

UK: Landlord's insurance is cheap, tenants pay council tax, if you have a management co they probably don't charge a huge whack for the first month. UK has good landlord/tenant arbitration stuff - fair, IMHO.

US: Varies by state, honestly, but the landlord will pay property tax; AFAIK (and I know everything is negotiable) the mgmt co usually takes 50% of the first month's rent. Some states very pro-tenant, some pro-landlord.

I have a totally non-ideal rental in the UK and, monthly, it gets less than half a percent. Just picked a place up in the US that gets > 1.5%. But I expect appreciation in the UK and none in the US.

IOW: Apples and oranges. I'd say half a percent in the UK is an ok target. Greater than that is pretty good.

kt

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Re: 1% rule in the UK
« Reply #4 on: March 28, 2014, 03:15:24 AM »
thanks, that's reassuring to know everyone!
actually, there is one house which might fulfil our needs for now and potentially give 0.75% in future if we rented it out. decisions decisions.

daverobev

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Re: 1% rule in the UK
« Reply #5 on: March 28, 2014, 07:32:37 AM »
thanks, that's reassuring to know everyone!
actually, there is one house which might fulfil our needs for now and potentially give 0.75% in future if we rented it out. decisions decisions.

0.75% is really good. 100k purchase price rented for 750 a month? Yeah.. very good. Assuming no ghetto! :)

kt

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Re: 1% rule in the UK
« Reply #6 on: March 31, 2014, 04:30:47 AM »
not a ghetto, just a small northern town. 65k / 500. still looking and thinking though.