Debt Vs Equity
Unlike equity crowdfunding, where investors lend to or become shareholders in a particular business where the risk is high, our investors invest in providing loans which are secured against affordable property in Central London.
Debt is the safest type of property investment. It’s senior to the borrower’s equity which acts like a cushion to protect your investment.
All Central London Capital loans are secured against a property, providing investors with a fixed net return of 5% pa* paid monthly.
Whilst we specialise in providing a high yield ROI investment backed by first charge over high demand affordable real estate in Central London, we can also facilitate prime off-market and off-plan investment property solutions.
Before purchasing an investment property for rental purposes it’s always a good idea to calculate whether it will be cash flow positive or cash flow negative. That is, will the property generate an income (positive) or will it require a monthly cash injection (negative)?
Properties should consider the many Purchasing and Annual Holding Costs incurred when buying a rental property. Please keep in mind that these items will vary and they do not take into account personal tax implications.
Purchase price – the agreed price for which the property will exchange hands.
Renovation Costs – money budgeted for renovations prior to the property been made available for rental.
Agents Fees – It is reasonably common practice in London for the buyer to pay some or all of the real estate agent’s selling fees/commission. However, in most cases these fees are paid by the vendor, this main depends on the sourcing agent and the type and location of the property.
Stamp duty – a duty placed on the purchase of a property charged by the local government for the registration of the property into the new owner’s name.
Private, Company or Trust ownership – It may be more prudent to acquire the property in a dedicated SPV Company or Trust to minimise stamp duty.
Mortgage Application Fees – charged by lenders upon application to secure a loan to buy the property.
Travel Expenses – flights, car hire, and hotel costs incurred when travelling to personally inspect a property.
Solicitors Fees – payable to the solicitor for all of the relevant legal work for the transfer of the property.
Research – books, local suburban reports purchased property portal subscriptions to research a suburb.
Accountants Fees – the property may be purchased in the name of a Trust or Company. There may also be a crossover here with the solicitor’s fees.
Council Rates Cutover – A vendor may have paid rates up to a time after the transfer of the property. The amount is then split between the buyer and vendor on a pro-rata basis.
Independent Valuation / Engineers Survey Report – a vendor may choose to pay for their own independent valuation or engineers survey report to highlight areas of concern.
Miscellaneous – this will include postage, telephone calls etc. It’s also worthwhile to include a contingency should some of the above costs be more than anticipated.
Annual Holding Costs
Mortgage Repayment – payable to the mortgage lender to repay the loan used to purchase the property.
Property Management Fees – if a professional property manager is appointed they will either charge a percentage of rent or a monthly flat fee.
Council/Municipal Rates – charged for collection of waste and upkeep of local services. Sometimes these are paid by the tenant.
Maintenance – costs for repairs and maintenance on the property and it’s fixtures and fittings.
Bank Fees – account keeping fees charged by the bank.
Landlord Insurance – protection against theft, damage, non-payment of rent, legal costs.
Letting Fees – some property managers may charge a letting fee for finding new tenants.
Pest Control – protection against pests and termites.
Cleaning – the property may require a thorough professional clean in preparation for new tenants.
Travel Expenses – incurred when visiting the property at times such as showing it to potential tenants or collecting rent.
Local Income Tax – may be charged by some local governments for the rental profits after any allowable deductions.
Land Tax – an annual tax on the value of the land on which the rental property is built.
Accountants Fees – payable for the administration of legal structures if a property is owned by a Trusts or Company.
Miscellaneous – again, this will include a contingency should some of the above costs be more than anticipated.
Once all of these costs have been factored into your calculations you will be able to determine whether a property will be cash flow positive or not.
In closing, it is imperative that you seek professional legal advice before you make any investment. Property investment is viewed by many as a very good investment and investment property in London is seen as a prime real estate investment.
Central London Capital has the expertise to provide a fully managed arm-chair investment property solution, to source, manage and grow an investment property portfolio that might include residential through to hotels and redevelopment projects.