Here is the deal breakdown on the financials of a property I’ve just completed on. I will do this with all the properties I purchase.
Property details
The property is a 2-bed terraced house in the Bury, Greater Manchester area.
The property was first put on the market for £145,000 and the seller reduced it to £130,000. I was able to agree a selling price of £125,000.
Capital
Fees:
All in all, the fees were £6,539 made up of:
Solicitors – £1,541
Stamp duty – £3,750
Up front Mortgage fees and valuation – £828
Building survey – £420
Other costs:
Refurbishment costs – £3,500
Deposit for mortgage was – £33,121 (73.5 %LTV)
Total money down – £43,160
Cashflow
Monthly Mortgage @ 4.79% interest only (ongoing fees added)- £377.84
Rent monthly – £900
Management fees 8%+VAT – £86.40
Ground rent – £2.25
Insurances – £30
Pre-tax profits- £403.51 per month
Return on Capital Employed (ROCE) – £403.51 x 12 = £4,842.12 divided by £43,160 X 100 = 11.2%
Yield – £900 x 12 = £10,800 divided by £125,000 x 100 = 8.7%
Conclusions
I’m really pleased with this deal as the rental was more than I expected. In my due diligence I used £650 per month rental. I also stress tested the mortgage rate at 8.49% and everything still stacked up. I ended up getting £900 per month for the rental.
The property is in a great area which is up and coming, so I’m expecting a payback (break-even) within two years plus £8K and £17K inc. rents.