#29 Gross Yield or ROCE or ROI? You NEED to Know This Inside-Out...The Thing is That Investors Dont Know This!!

This highly informative episode explains gross investment and net income in a clear and concise way for all of us who are interested in property investment. David includes detailed examples so that anyone listening will be better informed and have a more in-depth understanding of how to calculate the key numbers.   KEY TAKEAWAYS Property sourcing and deal packaging is a bespoke business where you are sourcing the specific requirements of a particular investor. It is about matching the numbers in order to reach a deal.   Gross Yield This is a number that everyone in the property market should know. Investors need to know it and it is the number deal packagers have to meet. It is the total income from the house, the total rent roll - if it is a single let it will be the one AST and the rent is easily identified. If working with HMO add up the income from each room. If you are calculating for SA, it is the total income from your guests in a calendar year. The total is then divided by the total cost of acquisition. The acquisition cost is the price of the property, stamp duty, accidentals and deal packaging fees. Take the gross income figure and divide by the cost of acquisition figure. The outcome is then usually expressed as a percentage. ROCE Return On Capital Employed (ROCE) - this is absolutely key and the number that the investor is most interested in. It is the return on the capital they’ve got employed in a deal. To work out the ROCE you need to know the net income. Take the gross rent figure and deduct any cost of ownership e.g.in an HMO the cost of insurance, wi-fi, water rates, cleaning etc. If it is a single let the deduction will be the agency fees and repairs. These amounts are all deducted from the income figure. You finish up with a net income figure for a 12 month period. Your net investment in the deal is calculated by – taking the net rent roll after all costs and dividing it by net amount of money left in the deal.   Gross Yield – the gross income divided by the gross cost of acquisition ROCE (Return on capital employed) – the net income divided by the net amount of money you’ve got left in the deal   BEST MOMENTS ‘We are here to serve’   ‘Vital information for you, make sure you get it right’ ‘In property, you are mixing together the concept of net income against a gross investment’ ‘There are only 2 numbers you need in property gross yield and the return on capital (ROCE) ‘Investors tell us what they want, and we go out and get it – a bespoke business’   VALUABLE RESOURCES https://www.facebook.com/groups/progressivepropertycommunity/ https://itunes.apple.com/gb/podcast/property-sourcing-profits-podcast/id1384873667?mt=2   ABOUT THE HOST David is a property expert with over 25 years’ experience and his own portfolio of 26 units. His current rent roll is in excess of £10k per month. He is also a partner in a Deal Sourcing and Packaging business in the North West of England and has sourced over 250 properties for investors since 2004. In recent years he has, by necessity, had to develop an expertise in LHA strategies. This area is increasingly becoming a niche for him, and he enjoys empowering other landlords by sharing the knowledge he has gained. The ultimate purpose when sourcing properties in this sector for investors is to minimise risk while maximising profit. He has had to find answers to the challenges of Tenant Find, Management, ensuring rents are paid and the transition to Universal Credit. These are strategies he uses in his own business and also on behalf of investors. His investor clients regularly achieve annual gross yields of over 20% with high occupancy rates and voids resolved, sometimes within hours. CONTACT METHOD https://www.linkedin.com/in/david-siegler-7b126316/ https://www.facebook.com/DavidSieglerInvestments/