Investment Appraisal

COMPARISON OF POSSIBLE RETURNS	1 BED APARTMENT OUTER LONDON SUBURBS @ £ 130,000	1 BED APARTMENT CENTRAL LONDON @ £250,000
WITHOUT BORROWING
Rental Income X 12 months	£675 pcm (6.2% gross) £8,1 00 p.a.	£1,408 pcm (6.8% gross) £16,900 p.a.
Expenses
Letting & Management fees @ 15% + VAT	£1,428	£2,978
Documentary Charges	£100	£120
Ground Rent p.a.	£50	£200
Service Charge and buildings insurance	£600	£1,200
Contents Insurance	£110	£200
Repairs Allowance	@ £25 pcm £300	@ £50 pcm £600
Gas Safety Report	£35	£55
	£2,623	£5,253
Net Revenue Return (before tax)	£5,477	£11,647
Net Revenue Return on capital	4.2% p.a.	4.7% p.a.
Possible Capital Appreciation of say	7% p.a.	7% p.a.
TOTAL RETURN before tax	11.2% p.a.	11.7% p.a.

WITH BORROWINGS OF	65%	65%
Net Revenue Return as above	£5,477	£11,647
Interest on 65% of cost @ 4.99%	(£4,217)	(£8,109)
Net Revenue Return after Interest	£1,260	£3,538
Return on investor's own funds	2.8% p.a.	4.0% p.a.
Possible Capital Appreciation of the property at say 7% pa	£9,100	£17,500
When expressed as a percentage return on investor's own funds	20% p.a.	20% p.a.
TOTAL RETURN before tax	22.8% p.a.	23.4% p.a.

The mortgage rate quoted is a variable discounted 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, also at the marginal rate, and will vary according to the length of time the property is held.

Acquisition Costs | Services & Fees | Letting & Management | Other Expenses |