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Example
Property Investment II–
70% Mortgaged Purchase
A property with a 70% mortgage and 30% capital deposit, when compared
with outright purchase, shows a significant yield against investment
capital deposited. When "gearing" property the investment
becomes particularly attractive. This option is ideal for someone
who does not wish to tie up significant capital in the investment
and take the risk of increased mortgage rates.
Interest rates are currently historically low. As part of our service
we can arrange a mortgage to suit your individual needs. In this example
mortgage rates are set at 5.5%, but are likely to fluctuate over a
long period.
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|
| Purchase: |
Cost (£) |
| Property* |
100,000 |
| Associated Costs (Stamp Duty, Legal, Survey) |
3,000 |
| Preparation to Let (Estimate) (Curtains, Paint, Furniture,
Appliances) |
5,000 |
| Sourcing Fee (4% of Property Value) |
4,000 |
| Total Acquisition Costs |
112,000 |
|
*Traditional 1st floor
flat. Sec entry, reception hall, bay windowed lounge, fitted breakfasting
kitchen, 2 bedrooms, en-suite toilet, bathroom, gas central heating.
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| Finance: |
|
| Deposit |
42,000 |
| Mortgage @ 70% |
70,000 |
|
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| Rental: |
|
| Let @ £700pcm |
8,400 pa gross |
| Gross Yield on Deposit Paid |
20.00 % |
| Less: |
|
| Insurance (est.) |
250 |
| Letting and Management Fee (15%) |
1,260 |
| Gas, Electricity, Safety Check, misc Maintenance |
350 |
| Interest on Mortgage Repayments (rates 5.5%)
|
3,850 |
| Total Annual Expenses |
5,710 |
| Net Income |
2,690 |
| Net Yield from Rental Returns on Deposit
Paid |
6.40% |
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| Total Income: |
|
| Add Capital Gain @ 8.5% (Scotland ave. 2001) |
|
| on 100,000 |
8,500 |
| Net Income on Rental |
2,690 |
| Net Annual Yield on Initial Investment
of Deposit Paid |
26.64% |
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