|
COMPARISON OF POSSIBLE RETURNS |
1 BED APARTMENT
CENTRAL LONDON
@ £385,000 |
2 BED APARTMENT
CENTRAL LONDON
@ £550,000 |
|
CAPITAL REQUIRED
|
£134,750 |
£192,500 |
|
WITH
BORROWINGS OF
|
65% |
65% |
|
Net Revenue
Return as above
|
£15,239 |
£20,914 |
|
Interest on ost @ 5.75%
|
(£14,389)
|
(£20,556) |
| Net
Revenue Return after Interest |
£850 |
£358 |
|
Possible Capital
Appreciation of the
property at say 7% pa
|
£26,950 |
£38,500 |
| TOTAL RETURN
before tax |
20%
p.a. |
20%
p.a. |
| |
|
|
| WITHOUT
BORROWING |
|
|
|
CAPITAL REQUIRED
|
£385,000 |
£550,000 |
Rental Income
X 12 months |
£400
p/w
(5.4% gross)
£20,800 p.a. |
£500
p/w
(5.2% gross)
£28,600 p.a. |
|
Expenses
|
|
|
|
Letting & Management
fees @ 15% + VAT
|
£3,666 |
£5,041 |
|
Documentary
Charges
|
£120 |
£120 |
|
Ground Rent
p.a.
|
£100 |
£100 |
|
Service Charge
and buildings insurance
|
£1,500 |
£2,250 |
|
Contents Insurance
|
£100 |
£100 |
|
Gas Safety Report
|
£75
|
£75
|
|
£5,561 |
£7,686 |
|
Net Revenue
Return (before tax)
|
£15,239 |
£20,914 |
|
Net Revenue Return on capital
|
3.95%
p.a.
|
3.8%
p.a. |
|
Possible Capital
Appreciation of say
|
7%
p.a. |
7%
p.a. |
|
TOTAL RETURN
before tax
|
10.95%
p.a. |
10.85%
p.a. |
|
|
The mortgage rate quoted is a 2-year fixed rate available through our mortgage advisers.
These figures are for illustrative purposes only, and exclude
repayments of capital and any allowance for void periods. The value
of investment property and rent levels can go down as well as up.
Investors are advised to seek appropriate legal advice before entering
into any contractual arrangement.
TAXATION
Net rental income is subject to income tax at the marginal rate
(22% or 40%), but all expenses of a revenue nature are allowable,
including loan interest. Furthermore, a wear and tear allowance of 10%
of the rent is available where the property is furnished.
Capital gains on investment property are subject to Capital Gains Tax
(unless the property owner is non-resident in the UK - in which case the CGT is nil).
The tax payable from April 2008 will be 18%.
|