Paul,
Hi and welcome to the forum. Asking other folks what they aim for is a bit like asking "how much do you earn? Gosh you must be rich", then you realize they have a lifestyle of spending £20K a month, and they are up to their eyeballs in debt.
So first things first. Does the calculation of your next investment fit your strategy? What strategy, you may well ask. In more boring terms, let's call it a business plan. To explain my opening gambit a bit more, my own UK property strategy, by the end of 2008 is to have a gross portfolio value of £5M, a gross annual rental income of £300K, and a net operating profit of zero. I also have a target to have more than £300K cash on hand, so that explains how I intend to make up the living costs over the period.
Having told you this, you still have no idea as to why this is my goal, but it doesn't matter. What matters is your own goal. So to answer your original question, and to put it into context, I will add UK properties to our portfolio if they satisfy the following criteria:
1 Our existing letting agents have to be prepared to take them on board
2 They have to be within 10 or 20 miles of our current 2 investment areas
3 I have to believe that I can remortgage them within 2 years to extract all the capital we put into them at the beginning
4 They have to provide a rental stress of > 140% of interest cost
5 They have to provide, before remortgaging, a cash on cash return of > 10%
Not much use to folks looking for
NMD deals, but then again, I probably spend about 30% of my time on our property portfolio. We have three other income streams, and property is only the means to the end.
If you have little capital, and a lot of time, it would make huge sense to make sure that you don't plan to have investments that initially create negative cash flow. You will eventually run out of cash.
I hope this example helps, and good luck with your one year, two year, five year business plan. You can't improve what you can't measure, and I can tell you, from experience, that once you make your first five year plan, and achieve it all in four years, you never look back. Without that plan, you don't know if you have achieved your objectives or not. As crazy as it sounds, no matter how ridiculous your plans may seem at the outset, they are infinitely more achievable by making them in the first place than not making the plan at all.
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