Example of a Property Portfolio Builder

Example of a Property Portfolio Builder

The following case study shows how you can turn one property investment into a property portfolio using one 25% cash deposit. The idea is to release equity from each property to buy the next one, therefore never actually impacting on your savings.

This example started back in 2000, and the strategy was to build capital rather than maximise rental yield. None of the properties have ever run at a loss. Today you would ideally have a starting deposit of £85,000.

%

Increase in value

%

Increase in rental

Total Value (Million)

Total Rent (PCM)

Flat 1 (2000)

  • Purchase Price =  £150,000
  • Deposit (25%) = £30,000
  • Mortgage (75%) =£120,000
  • Rent =  £1200 pcm

4 Years later… (2004)

  • Purchase 3 new flats using the equity that has been released, with £6,000 spare

Flat 1 (2004)

  • Value =  £300,000
  • Remortgage 75% = £225,000
  • Deposit = £75,000
  • Cash released =  £180,000
  • Rent =  £1300 pcm

Flat 2 (2004)

  • Purchase Price=  £210,000
  • Deposit (25%) =£52,500
  • Mortgage (75%) =  £157,500
  • Rent  = £825 pcm

Flat 3 (2004)

  • Purchase Price =  £235,000
  • Deposit (25%)=£58,700
  • Mortgage (75%) = £176,250
  • Rent  = £925 pcm

Flat 4 (2004)

  • Purchase Price =  £250,000
  • Deposit (25%) = £62,500
  • Mortgage (75%) = £187,500
  • Rent = £950 pcm

Summary:

  • Value of 4 properties in 2004 = £995,000
  • Total rent received pcm = £4,000

A further 10 years later (2014)

  • Value of these properties in 2014 = £1.87m / Increase in value of portfolio in 10 years = 88%
  • Total rent received pcm = £4,975 / Increase in rental income after 10 years = 24%

This investor went on to purchase more properties by releasing equity from this portfolio.

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