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Example Of Return On A £100,000 Property Investment In Long Eaton

How Could You Invest £100,000 In Long Eaton And What Returns Could You Expect? See here for an e...

How Could You Invest £100,000 In Long Eaton And What Returns Could You Expect?

See here for an example on the market (current as at 20/1/2015)

Depending on the condition and the fixtures and fittings  of the property you could expect to receive a rental income of £525-£600. Taking a mid- point between £525 and £600 an average rent would be £563 (rounded) used in the scenarios below.

You could pay cash for this property and receive a rental income from one property or you could use the £100,000 to put deposits down on several properties.

Using the mortgage deal below (number 3) you would need to put down at least 25% deposit on each property. Let us look at several scenarios.

1. One property brings in £563 per month or £6756 per year

2. Two properties £563 x 2 = £1126 per month or £13,512 per year In this scenario you would be putting down 50% on each property. Total borrowings would be £100,000

£100000 x 3.5% = interest payments of £ £3500

The income from two properties less mortgage payments is £13512 less £3500 = £10012 which is £3256 more per annum than one property!

3 Three properties 3 x £563 = £1689 per month or £20268 per annum.

In this scenario you would be putting down 33.3% deposit on each property. Total borrowings would be £200,000  

£200,000 x 3.5% = interest payments of £7000

Total income from three properties less mortgage payments is £20,268 -£7000 = £13,268 which is £6512 more than one property.

4. Four properties 4 x£563 = £2252 per month or £27024 per annum

In this scenario you would be putting down 25% on each property. Total borrowings would be £300,000

£300,000 x 3.5% = interest payments of £10,500

Total income from four properties less mortgage payments would be £27024 - £10,500 = £16,524 which is £9768 more per annum than one property.  

Capital Appreciation On The Four Scenarios Above

“We expect prices to rise by 17 per cent in the next three years alone,” says Lucian Cook, Savills head of UK residential research, who also played down fears of another housing bubble. 

“We see no evidence of an imminent housing bubble and think it an unlikely prospect," he said. "For a bubble to occur we would need to see five year price rises of 35 per cent to 40 per cent and/or mortgage interest rates of around 7 per cent, which seems improbable.

What Would The Value Of The Properties Be Taking Into Account The Predicted Capital Appreciation  By Lucian Cook After Three Years

1. One property £100,000 plus 17% . The predicted value at the end of 3 years is £117,000

2. Two properties £100,000 x 2  plus 17%. The predicted value at the end of 3 years is £234,000

3. Three properties £100,000 x 3 plus 17%. The predicted value at the end of 3 years is £351,000

4 Four properties £100,000 x 4 plus 17%. The predicted value at the end of 3 years is £468,000

What Are The Total Gross Gains Taking Into Account Rental Income And Capital Appreciation Over Three Years On The Four Scenarios?

1 On one property rental income of £6756 x 3 years  = £20,268 plus £17,000. Total = £37,268. Which equates to 37.27 % rounded over three years on the £100,000 invested. Or 12.42% per annum

2 On two properties rental income of £6756 x 2 (properties) x 3 years = £40,536 –( interest payments of £3,500 x 3 = £10,500. Total rental income less mortgage payments over three years = £30,036. Plus £34,000 capital appreciation. Total = £64,036 . Which equates to 64.04 % rounded over three years on £100000 invested or 21.35% per annum.

3 On three properties rental income of £6756 x3 (properties) x 3 years = £60804 – (interest payments £7,000 x 3 =£21000). Total rental income less mortgage payments = £39,804. Plus capital appreciation of £51,000. Total = £90,804. Which equates to 90.80% rounded over three years on £100,000 invested or 30.27 % per annum.

4 On four properties rental income of £6756 x 4 (properties) x 3 years = £81072 – (interest payments of £10,500 x 3 =£31,500. Total rental income less mortgage payments = £49,572. Plus capital appreciation of £68,000. Total = £117,572. Which equates to 117.57% over three years on £100,000 invested or 39.19% per annum.  

Mortgage Rates  (Current As At 20/1/2015)

There are over 500 different rates in the market at present. When the credit crunch was in full swing the number of deals in the market fell to about 50, pre- credit crunch there were close to 1000

Examples concentrating on 2 year fixed rates

1 Loan to value of 85% putting 15% down; 4.99%, 3% broker fee, £130 booking fee

2 Loan to value of 80% putting down 20%; 4.25%,No lender fee, £150 broker fee

3 Loan to value of 75% putting down 25%; 3.5%, No lender fee, £150 broker fee

4 Loan to value of 75% putting down 25%; 2.5%, Lender fixed fee of £2495, £150 broker fee

For more information on mortgage rates, please use the contact details below.

mailto:info@belvoirlettingsmortgages.com

Tel: 029 2069 5445

Assumptions

The fixed mortgage rate gets extended for the third year, there are no voids, there is no maintenance, there are no management charges. Don’t forget there is  a one off £150 broker fee. There are solicitors costs involved in buying properties.  

If you want to discuss property investment in Long Eaton or go through these scenarios in more detail, please don’t hesitate to contact Belvoir Long Eaton the property specialists on 0115 972 4027

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