Investment Appraisal

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%.

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