Although recent years have been rather exceptional in property investment terms, they nevertheless provide an example of what can be achieved by buying off plan. If you had £50,000 to invest, this could have been enough to place deposits on £1 million of properties off plan. This assumes a gifted deposit from the developer of the other 10% required for a buy to let mortgage.
In three years (2002-4) prices doubled in many parts of the UK, so the £1 million portfolio would now be worth £2 million. This means you would have gained a profit of one million pounds sterling from an initial investment of £50,000 plus fees.
Even if the total fees for (say) ten properties at £100,000 each had amounted to a further £45,000 the £1 million growth would represent a return of over 1,000% on your total investment of £95,000.
Added to this, your tenants will be paying sufficient rent to cover your mortgage interest at current levels, so by the time the value has doubled again, you will have invested nothing further, but gained a further £2 million.
Remembering the Rule of 72, at 24% compound growth rate the price will double every three years.
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| Coventry |
70,000 |
3,500 |
105,000 |
35,000 |
| Coventry |
90,000 |
5,000 |
125,000 |
35,000 |
| Barnsley |
80,000 |
4,000 |
105,000 |
25,000 |
| Hartlepool |
60,000 |
6,000 |
85,000 |
25,000 |
| Bulgaria |
70,000 |
7,000 |
110,000 |
40,000 |
| Totals |
370,000 |
25,500 |
530,000 |
160,000 |
Here is a more detailed example of the finances associated with a typical off plan purchase through Viceroy Invest.
| Open Market Value |
£100,000 |
| Discounted Price |
£85,000 |
| Gross Profit (Instant Equity) |
£15,000 |
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| Reservation Fee |
£1,000 |
| Viceroy Invest Fee (2% + VAT of Property Gross Price) |
£2,350 |
| Deposit on Exchange of Contracts |
£5,000 |
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£8,350 |
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| Solicitor |
£500 |
| Mortgage Arrangement |
£500 |
| Stamp Duty (included for example purposes only, threshold 0% up to £125,000) |
£1,000 |
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£2,000 |
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(i.e. £85,000 purchase price minus reservation and deposit) |
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Subject to valuation, you should be able to obtain a mortgage of 85% of £100,000, which provides the £79,000 balance to finance and also returns £6,000 cash back to you.
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5% |
10% |
15% |
| Value |
£105,000 |
£110,000 |
£115,000 |
| Price Paid |
£85,000 |
£85,000 |
£85,000 |
| Gross Profit |
£20,000 |
£25,000 |
£30,000 |
| Subtract Costs |
£4,350 |
£4,350 |
£4,350 |
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Call +44 (0) 121 609 7095  
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