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  • New Members

    Introducing me and my journey to date!

    Thanks JLASSET

    For my own clarification, are you talking about ROI based on letting returns or capital growth? I have assumed the latter given the reference to time. If my assumption is correct, isn't your statement only true if the purchase is not partially debt funded (i.e. a cash purchase)? If I have LTV of 75% then wouldn't appreciation only have to be a quarter of inflation to keep pace (if you exclude buying and selling costs, etc)?

    Also, if leveraged, wouldn't inflation begin to erode the debt? In which case, even if capital growth on the equity capital invested is just keeping up with inflation, if your LTV is higher than 50% you are still in a net benefit position?

    I agree with the sentiment of your advice and I'm definitely not saying to look at deals with such a razor thin margin but I just want to make sure my understanding of the economics is sound?

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    You probably have to look at both situations on their own merits.

    cash  - its fairly simple (income from rent less all costs (maintenance, time, management, lettings fees, tax etc) + capital growth) subtract inflation and you have net gain.

    with mortgage - you look at net income rent less all the same costs as above but also including mortgage - if low enough yield it might be negative once you include tax as can't offset mortgage cost these days unless in a ltd comp. then add capital growth less inflation for net result. ROI on cash compares the net amount overall made pa vs the cash put in. There will always be transactional costs, like buy, sell, legals, stamp duty etc.

    best of luck


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    regards Andrew Peers - property investor / sourcer - 07912674181

    a.peers@seamlessproperty.co.uk

    Property Redress Scheme Number 011436     NLA member 174404