How can I develop an Investment Portfolio of Property with minimum capital outlay?

This has to be one of the most exciting and tangible aspects of this form of investment. Let us consider our earlier example.

An apartment purchased off plan for £100,000 with a scheduled completion date in 24 months time.

NB. It is important to remember that this will be the developers “incentive price” to encourage take up of the off plan project and in all probability the property would have a current value in the region of £120,000 to £130,000.

Initial deposit = £30,000

Assuming a very conservative annual increase in value of 20% (combining the historic growth of 15%+ together with the “off plan” discount) the property will have a market value of approximately:-

£120,000 at the end of year one

£144,000 at the end of year two

The goal is now to keep the property and arrange for a mortgage which in the majority of cases can be based on 80% Loan to Value (Banks will lend 80% of their current valuation). Remember that the value of the property has risen to approximately £144,000 and not £100,000 so the bank would be willing to lend:-

80% of £144,000 = £115,200

You have at this stage invested £30,000 and the balance owed to the developer is £70,000

Total purchase price including your deposit = £100,000

The Bank will lend £115,200

In other words you have now had your original deposit returned to you and you are now the owner of a property with a mortgage that can be let whereby the rental income from the property would more than cover the mortgage payments.

The original £30,000 plus the additional £15,200 can now be used as a deposit for a second property and the exercise repeated, resulting in an additional property being added to your portfolio every 2 years with the majority of the investment being self financed from the initial deposit invested.

Next Page- What costs are involved in purchasing an off plan investment property?

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