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.

 
 

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