Overseas Property Capital Growth Example
Many investors and purchasers of holiday homes abroad are attracted by the high capital growth that is possible.
This example show the difference investing in property can make to net worth over a period of time.
It is a very simplified example and all figure are for illustration purposes only and are not a guarantee of future performance.
In these examples the existing mortgages are not paid off.
Mr & Mrs Smith
| Current House Value | £150,000 |
| Remaining mortgage | £50,000 |
| Equity available | £100,000 |
| Decision - do not invest in overseas property | |
| Assume 10% growth per year | |
| After 5 Years | |
| Own House Value | £241,577 |
| Mortgage | £50,000 |
| Equity | £191,577 |
| Equity After 10 years | £339,061 |
It is easy to see from this example that long term property investment can make a dramatic difference to a persons net worth.
Mr & Mrs Jones
| Current House Value | £150,000 |
| Remaining mortgage | £50,000 |
| Equity available | £100,000 |
| Decision - Invest in Overseas Property | |
| Invest in two properties at: | £150,000 |
| Required 30% deposit with costs = £50,000 each | £100,000 |
| Total value of investment property: 2 x £150,000 | £300,000 |
| 2 years build time | |
@ 5% UK interest only mortgage on the required £100,000 equity released from current house (just £165 each for a couple). |
£330pm |
| 2 years interest payments | £7,920 |
| Capital appreciation 20% year during 2 year build | 40% |
| Value after 2 years (£216k each) | £432,000 |
| Equity in investment property | £132,000 |
Don’t sell at completion (could invest in 2 more properties using new equity) |
|
| Rent out to cover mortgage - in reality rental income should provide an income but in this example we only assume covering costs. | |
| Assume 10% growth per year | |
| After 5 Years | |
| Investment property value |
£574,992 |
| + own house | £241,557 |
£808,649 |
|
| Mortgages | £350,000 |
| Equity | £458,649 |
| Equity after 10 years | £965,092 |
Please contact us if you would like more information
All figures are for illustration purposes only and are not contractual.
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