17/03/2025
Could your property investment give you 5.86% of Net return?
ℹ️ℹ️ℹ️This information will be based on the following property available for sale in the market as the reference.
https://www.rightmove.co.uk/properties/156546698 #/?channel=RES_BUY
🏠🏠🏠This 2 bedroom ground floor flat, S/O Freehold and service charge of £2,164 per year in Silvertown in East London is in the market for sale with the price of £290,000.
⁉️⁉️⁉️1.how much deposit can you put down for investment?
🏦🏦🏦Most the lenders prefer 25% deposit in order to get the better interest rate in the market. Some lenders have criteria of minimum income of £25,000 p.a for BTL investor.
🏠🏠🏠 If you are looking to invest this two bed rooms flat in London for about £290,000, you will need about £72,500 for 25% deposit.💷💷💷
Solicitor charges should be estimated for 1% of the property value which will be about £2,900.
From 01/04/2025, there is no Stamp duty for first time buyer for the property value under £300,000. Stamp Duty for single property owner will cost £4500. Stamp Duty for additional property will cost £19,000.
https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/ #!/intro
🏠🏘🏠For BTL investor who owns main residence property and buying this additional property for investment will cost £19,000 for stamp duty. 💰💷So, you will need the initial capital investment amount of £94,400. ( £72,500 + £2,900 + £19,000 )
⁉️⁉️⁉️2.How much money can you borrow for the mortgage?
🏦💷🏦The lenders check the interest coverage ratio of 145% for BTL properties. If the BTL interest rate is 5.2% for the loan amount £217,500 which is 75% LTV, the annual interest only payment will be £11,310 per year (£942.50pcm). Most lenders prefer that your rental income should achieve 145% of your interest payment £11,310 p.a which should be about £16,400 per year (£1,366 pcm of rental income).
https://www.rightmove.co.uk/properties/155986328 #/?channel=RES_LET
🏠🏘🏠Similar 2 bedrooms property around the area is being let for £1800pcm. If the service charge is £2164 per year which is about £180.00 pcm, the net rental income of £1620 pcm (£1800pcm - £180pcm) after monthly service charges is higher than what the lender’s requirement of the interest coverage ratio of 145% which is about £1,366 pcm of rental income. So, the mortgage application for the amount of £217,500 is likely to be approved by the lender.🏦💶💷
⁉️⁉️⁉️ 3.How much you can get the return from the property investment?
🤵♂🤵🤵♂If you let the estate agent to manage your property, there will be let & manage fee of 12%-15% of your rental income which will be from £216 pcm of estate agent let and management fee. The net rental income after the interest payment, estate agent’s management fee and service charges will be £461.50 pcm (£1800 - £942.50 - £216 - £180) which is about £5,538.00 per year and ROI will be 5.86% (£7,122 / £94,400).
If you are managing the rental property by your own, your net income will be £677.50 pcm (£8130 per year) and ROI will be 8.61% (£8,130 / £94,400)
🚨🚨🚨Due to the current economic and political climate situations around the world, the market is predicting that the inflation will be longer and interest rate will be staying higher in foreseeable future. At this market situation, it is better to reduce the loan amount every year if there is spare cash available from investment which will reduce the interest payment of the loan amount.
📉📈📉There will be slower chance of property price appreciation during the higher inflation and higher interest rate environment because there are less borrowers who are stepping onto the property market. But there will be higher chance that rental prices are likely to be increased due to the inflation.
This would be helpful to make the decision whether investment on property is a good choice or not.
P.S : this is exemption based on that BTL interest rate of 5.2% and BTL property is your additional property and you own the residential home. Tax on rental income may vary according to the individual’s income tax bands and type of investment under the personal name or under Limited company.
🚨🚨🚨Liability Disclaimer : We will accept no liability for any loss or damage including, without limitation, indirect or consequential loss or damage arising out of or in connection with the use of our social media page.🚨🚨🚨
2 bedroom flat for rent in Woodman Street, E6, Silvertown, London, E16 for £1,950 pcm. Marketed by Foxtons, Canary Wharf
