22% Return on £37,000 explained

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So the past few weeks have seen us advertising to investors in Newark that they can get 22% return on £37,000. In between the mutterings of “it’s too good to be true” we’ve met some really interesting people and had some very good conversations with local investors interested in getting a better return from their savings.

Is it really too good to be true? Let’s see…

The property in question is a terraced house on Vernon Road, Kirkby In Ashfield, NG17. This property has been renovated and is now a 5 bedroom House of Multiple Occupation (HMO) with shared kitchen, bathroom and lounge. It’s one we manage but the owner would be willing to sell it as they are looking at some development projects.

Vernon

The property is let out to a company on a full repair and insuring lease with over 18 months remaining. The company then sublet the individual rooms and they take the hit on any void periods. In effect it’s a guaranteed rent of a HMO without the hassle.

The figures, buying with cash, work out as follows…

£125,000 – Purchase Price
£5,250 – Solicitor & Stamp Duty
£13,200 – Annual Rent
10.13% – Return On Investment

Pretty good return for a buy to let investment but not quite 22%. So, how can we double the return? Quite simply really…

The figures, buying with a mortgage, work out as follows…

£125,000 – Purchase Price
£5,250 – Solicitor & Stamp Duty
£31,250 – Deposit (25%)
£13,200 – Annual Rent
£4,687 – Annual Mortgage Payments @ 5% Interest Only
£8,513 – Net Rent
23.32% – Return On Investment

Buying with cash is great and makes things much simpler and clearer however by leveraging the banks money you can see how it makes yours go much further. This is compounded further through capital growth if property prices rise. I’ve touched on this previously with this post.

If you’re interested in investing in property across Newark & Nottinghamshire I’d be more than happy to help and advise where possible. Get in touch today or pop in for a chat over a cuppa.

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Eyes On… Potential 5 Bed HMO In Mansfield

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Houses in Multiple Occupation are becoming more and more popular especially after the announcements regarding the mortgage interest tax relief. Landlords are looking to maximise their returns and HMOs are one strategy that ticks the boxes.

Over the coming weeks I will be highlighting a few entry level HMOs that could potentially provide you with higher returns than the standard BTL investment.

This week we have a 3 storey property on the Berry Hill estate in Mansfield. 24 Cairngorm Drive currently has 4 bedrooms, 2 bathrooms, kitchen, lounge and WC. There is also an integral garage which you would convert into the 5th bedroom.

At the moment it’s quite bland but you would add some personality when furnishing the place. To renovate and furnish a property this size you’d be looking at around £24,000 with the total cash required circa £68,000 (based on obtaining a 70% LTV mortgage on the purchase).

5 bedrooms in this area would generate around £1,900 per month when fully let. After all costs, this would give you a net yield of 15.16% on your capital.

Properties such as this do require a higher level of investment, and indeed management, but as you can see the returns are also far superior.

Looking for better returns on your investments? As well as managing property we source investments across Nottinghamshire. We’ve got more where these come from so get in touch with your requirements.

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