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Case Study A

Case Study A

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‘ABC aim to offer all Clients an individually tailored package to assist with both buying an investment property but also to provide assistance in relation to any refurbishment required, thus resulting in the maximum achievable ROI / Yield’

Long term capital growth and requirement for 8 – 10% yield.

Client A had never purchased rental property before and does not reside in the locality. Client had been advised to request the support of ABC’s Investment Team and to consider Wirral / Ellesmere Port.

A member of our Team undertakes Zoom meetings with Client to ascertain budget and requirements as to the type of investment required by Client. Outcome of meeting determines that Client is looking for a minimum 15 year investment with a view to obtaining an 8 – 10% yield based on total initial outgoings (including purchase price, legal fees, refurbishment costs and mortgage expenses during refurbishment period)

Staff from ABC began search throughout local areas and made an offer of £85,000 for a 3 bed mid terraced ex local authority property in Ellesmsere Port that required full refurbishment. The offer was accepted by the Vendor and Client instructed ABC’s nominated Conveyancing Team to act on his behalf. During the interim period the Refurbishment Team from ABC produced a fully itemised refurbishment plan that was agreed by Client A. The work was put out to tender by ABC and 14 days later three quotes were received and costs of the work required were agreed at £18,000 and contractor terms were signed by all parties in readiness for completion of purchase which meant that at the point of completion of the purchase the Contractors were able to commence works only 5 days after keys were received and working on a 5 week refurbishment programme (based on there being no unexpected issues)

Payment terms 1/3 at commencement of works, 1/3 payable at the end of week 3 and the final instalment to be made to the contractor within 14 days of the final snagging works being undertaken to a satisfactory standard.

Works commenced as anticipated, the kitchen had already been chosen, the carpets and the tiling to the bathroom all confirmed, therefore the Contractor was able to undertake works without any undue delays.

ABC’s Inspection team undertook weekly inspections and were able to provide the Client with video evidence of how the project was progressing and alongside this provided supporting photographs and detailed statements of any issues that had come to light during the previous week.

At the point of the Contractor deeming the site build complete two steps were taken by ABC, firstly the Inspection Team undertook the Snagging visit, working from the schedule of works they were able to determine if the work had been completed to a satisfactory standard and secondly the property was released onto the lettings market.

Marketing pictures and videos were taken and advertising commenced at a slightly higher rent than had first been determined due to both the standard of finish and demand increasing.

Should snagging find any issues, the contractor must return to site to rectify these prior to final payment being released. In this case the property was released onto the rental market 6 weeks after commencement of work, a tenant had applied for the property within 7 days of marketing and viewings. Following completion of all referencing of all applicants and guarantor the tenant was in situ and rental income had commenced within 3 weeks of completion of project.

FINAL VALUE OF PROPERTY, RETURN ON INVESTMENT (ROI) AND YIELD:

Return on investment: 10.42%
Yield: 9.07%
Total investment by Client: £45,000
Profit per month: £391.00

Example figures*:

The above figures are based on a purchase price of £86,000, refurbishment costs of £18,000, monthly rent of £650.00, initial legal fees of £1000.00, mortgage interest rate of 3%, mortgage set up fees of £1999.00, lending of 75% LTV with a requirement of 150% of rent coverage and a stress rate of 5.5% *Note – please note that the market place can change and returns cannot be guaranteed but should be used as a comparable only.