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Investment example

If you invest 100 000 you will have different sources of ROI. Dependent on the individual structure in the project you will have some sort of “rental return”, out of which the majority will be payable quarterly or annually and a smaller portion called the IRR (internal rate of return) will be payable on completion. These figures could look like this:

Rental return payable quarterly: 12% - £ 12 000
IRR, payable on completion: 4% - £ 4 000

Total rental return with IRR 16% - £ 16 000

On top of this you will have at least a conservative capital appreciation. How much is always hard to predict, and we tend to give you three scenarios, where best case is based on the previous year’s performance. For instance if the previous year’s capital appreciation was 10% on the property value, best case would be 10% on the total capital. If the leverage was based on 70% mortgage and 30% equity, the actual capital gains based on the equity would be 33%. Likewise a median scenario would be based on 50% of previous year’s capital appreciation would be 5% on the total capital and 16.66% on the equity. The worst case scenario would be based on 25% of the previous year’s capital appreciation and yield 2.5% on the total capital and 8.33% on the equity. The individual projects will have various sales costs/closing costs which will be deducted from the gross profit (capital appreciation). The mortgage may also vary from project to project, giving different leverages. Hence each prospectus must be studied to get a correct picture of the return on your investment.

Following the example above and estimating a median capital appreciation, the capital return would be, 16.66% of 100 000 = £ 16 666. Giving you a total annual median return of £ 32 666 or 32.66%

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