Property Investment

WHEN TO BUY

Whilst there are always good and bad times in the property market there will always be opportunities for property investors.

FUNDING

There are a number of different methods to borrow money for buy to lets, the most obvious being mortgages, but there are also bridging loans and crowd funding. There are a number of ways to finance a deal and each method will depend on how much you are looking to borrow and what for, if you need more expertise consult a mortgage broker.

INCOME & CAPITAL RETURN

When the value of the property increases that’s called CAPITAL RETURN

The rent you receive is the INCOME RETURN

It’s important to consider any costs associated with increasing the value of the property when working out Capital Return and any running costs when working our Income Return.

The basic numbers;

Working Out Capital Return

Capital Return = Profit / Total Costs

Example:

If you bought a house for £100k and spent £30k refurbishing and it is revalued at £150k then you would carry out the below to work out the Capital Return.

£100k + £30k = £130k of Total Costs

£130k - £150k =£20k or Profits,

£20k / £130k = 15.38%

Working out Income Return or the “Income Yield”

Yield = Total rent - Running Costs / Current Value or Property

Using the same example as above with a total cost of £130k, let’s assume you receive £1,000 pcm (per calendar month).

12 x £1,000 = £12k pa

less running costs of £300 pcm

12 x £300 = £3,600 pa

£12k - £3.6k = £8.4k

£8.4k / £130k = 6.46%

Total Return

Total Return = Capital Return + Income Return

TOTAL RETURN = 21.84%