The Golden Rule of PurchasingThe Golden Rule of Purchasing

with Yvonne Emerywith Yvonne EmeryProperty Investment CoachProperty Investment Coach

January 2011January 2011

The Golden Rule of The Golden Rule of Purchasing PropertyPurchasing Property

By Property Investment CoachBy Property Investment Coach Yvonne EmeryYvonne Emery

www.YvonneEmeryCoaching.co.ukwww.YvonneEmeryCoaching.co.uk

How do I know if a property will stack up?How do I know if a property will stack up?

•If you’re not making profit the property is a liabilityNOT an asset

•Guaranteed cash flow at 6% interest rates (the average rate for Buy to Let Mortgages).

ExampleExample

Purchase Price £100,000

Mortgage is 75% = £75,000

Interest rate is 6%

The golden ruleThe golden rule

For every £20,000 lending at 6% = £100 /m interest payment.

This is how ……

Purchase Price £100,000Mortgage £75,000

Interest Rate is 6%

£100,000 borrowed at 6% = £6,000 per annum

÷ 12 months = £500 per month

£100,000 = £500 / mth

£20,000 = £100 / mth

Agreed?

Purchase Price £100,000Mortgage £75,000

Interest Rate is 6% Rent income calculatorRent income calculator

Back to our exampleBack to our example

£75,000 at 6% = £375 per month

75,000 ÷ 20,000 = 3.75 x 100 = £375

e.g. £60,000 = £300 /mth £120,000 = £600 /mth £105,000 = £525 /mth

Purchase Price £100,000Mortgage £75,000

Interest Rate is 6%

Alternative calculationAlternative calculation

Mortgage amount

Take off 2 ‘zero’s’

Divide by 2 e.g. 75,000 (take off 2 zeros)= 750

750 ÷ 2 = 375

Same Result!

Knowing if your property ‘stacks’Knowing if your property ‘stacks’

Mortgage = 375 / m at 6%

Expenses = 100 / m

Letting Agent = 55 /m (10% of rent)___530

Rent need to be £530 / m to break even

Any rent above £530 is CASH-FLOW.

Working out how much Working out how much you can offer on a propertyyou can offer on a property

Use this formula backwards.

Rent = 550 / m

If £20,000 = £100 /mth

Max offer = 5.5 x 20,000 = £110,000

This rule of thumb calculation will ensure you don’t offer too much and make sure ALL your property brings you positive CASH-FLOW.

www.YvonneEmeryCoaching.co.uk

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