Profit Margins and expenses – there’s easier ways to earn a crust?

Just done mine and, for the first tine in 18 years, made a loss. Hopefully, I'll be out of the PRS before the end of this year. Definitely a better way to earn a crust!

How did you get -ve figures on private use?

Have your properties increased in value over the last two years?

If not, that's down to your purchasing decisions.

If they have, then you maybe you should consider your Return on Capital invested as a percentage of those gains.

I can see that you have some mortgages, so there is at least some leverage in your strategy, but was there enough?

If you have borrowed more your tax and hence profits exposed to income tax would be lower but your Return on Capital invested would have been higher.

Very few new businesses turn big profits in the first few years. It's a marathon not a sprint.

See the linked blog below, which I wrote 12 years ago ...

https://www.property118.com/the-roots-of-my-property-investment-strategy/

Reply to the comment left by NewYorkie at 26/01/2022 - 18:09
I wish you well with your exit.

If you're losing money, that's down to you. Either you purchased the wrong properties or your ownership structure is wrong.

However, if you're getting out because property investment no longer 'floats your boat' then I can sympathise with that. After having made millions from property investment over the last 33 years I am ready to wind down a bit more. Accordingly, I am selling the properties with the lowest returns on income and capital appreciation and the highest demands on my time. That's not to say I will give up property investment, I merely pivoting my strategy.

If you want to pivot or get out of the business completely then it will pay to get good tax advice from Property118.

Looks to me as though your profit is consumed by finance charges. You are too highly geared.

If you have significant capital gain in your properties, sell one/some and use the capital gain to clear borrowing on the others.

Reply to the comment left by Smiffy at 27/01/2022 - 09:24
I disagree, please see my comment and link above

Reply to the comment left by Mark Alexander at 27/01/2022 - 06:19
Thanks, Mark. If we all made perfect purchasing decisions, we'd all be wealthy! London did well for me. Yorkshire has been just about profitable over the 12 years, but my loss was down to zero rent from a feckless tenant for 16 months. I have bought a house, extended and refurbished, with a view to holiday letting this year, but BTL just doesn't do it for me anymore.

Reply to the comment left by NewYorkie at 27/01/2022 - 09:34
I completely understand and please be assured that I wasn't trying to be facetious.

I too have had bad tenants in the past and still do. However, about a decade ago I accepted that any losses I incurred as a result of bad tenants were as a result of the choices I had made.

To mitigate my risks I improved the referencing process but more importantly I purchase Rent Guarantee Insurance.

No RGI = No Tenancy!

If I can't get good tenants I accept that's because I made a mistake when I purchased the property, so I cut my losses and sell it.

I still get a few bad tenants because I think it's impossible to completely avoid them, but the insurance mitigates the time and effort I need to spend worrying about the problems they create and it also mitigates my losses.

Reply to the comment left by NewYorkie at 27/01/2022 - 09:34
I feel your pain. Sometimes it is enough to sell just to get rid of the headache.

Reply to the comment left by Mark Alexander at 27/01/2022 - 09:42
When you go into property management with eyes wide open it allows you this self 'justification'. Don't forget the majority of those on here (I sense) are either accidental Landlords, or people that invested years ago and moreover when the most important regulations were there, but less so orientated at catching the Landlord out. The undercurrent has changed...the private LL is the devil incarnate! There are still people out there that just simply want to provide a safe, nice home or others, but are scared out of their wits by the power of the tenant these days and the institutional backing they hold. I get it...I really do.
Who wants the stress and sleepless nights? As a result only the 'career' Landlord or others with broader shoulders (deeper pockets/financial reserves?) are willing or can ride the current storm. Add to that the forecast of EPC costs, more red tape and its enough to push anyone over the edge and sell up. (just plan your exit as best as you can) If the end game is to ensure all housing is controlled by the state/social sector and anything else is held by big organisations then that is what will be. Why is the grass always deemed greener on the other side when experience already tells you the reality is always turns to mud as everyone tromps over it?