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First off plan investment - Liverpool L3


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Hi all, 

I've been listening and researching for a couple of years on and off, I have now decided to start my investment journey!

My time is quite limited for research so I stumbled across an investment company and thought I would give them a shot to see what they can offer. So far I am quite impressed, not forcing a sale and generally being very helpful. They seem to know what they are doing and everything makes sense going by my limited knowledge. My main aim is capital gains over a long period with multiple investments for a retirement fund, but of course the rental profits need to be afloat too! Ill get to the chase and below is the recommendation they have come up with.

 

Off plan 1 bed 9th floor apartment 399sq ft in Liverpool L3

Just outside the business district and walking distance to city centre. Within development areas too. 

Developer is Vinco 

Due to complete Q2 2020, ground works have just began. Long stop date June 2021

Price: £132,525 with normal 75% LTV mortgage

£5000 reservation fee which is part of the deposit with exchange 28 days after.

Initial deposit at exchange 30% (£39,758)   :wacko:

Service charge: £798/year 

Ground rent: £300/year

The developer requires the purchase of a furniture pack at £2399

Funds held in stakeholder escrow and released in stages once signed off. 10% of property value insured (33% of deposit) 

They have a compulsory 3 year rental guarantee of £663/month and no service/ground rent charges are applied for those first 3 years.

To sum it up ignoring the 3 year incentive... (mortgage interest rate 2.69%)

cash invested £42,656

monthly rent £663

gross yield 6%

net yield 2.5%

ROI 7.8%

monthly pre tax profit £278.99

Although thats not with allowing any void periods!

With 5.5% interest rate it only scrapes through month to month with a profit. 

Hope that all makes sense.. i would very much appreciate anyones input!

Cheers

Mark

 

 

 

 

 

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1 hour ago, janeen morris said:

Hi Mark - I can't offer advice with purchasing off-plan, I've never done it but do check with your broker about a mortgage for a 9th floor flat. Make sure you can get borrowing on a property that high before committing.

Thanks Janeen, have you witnessed problems before on borrowing on a high level flat? 

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Have you considered the alternatives for your budget and location? 

I know it's slightly further out, but if you widen the postcode search there are well built freehold 2-3 bed terraces that are already built and ready for tenants so you're earning from month one rather than having your deposit locked away in escrow for over a year?  Probably generates the same net yield and ROI, the guaranteed rent will probably already be factored into the PP and if all flats come online at the same time, you'll be competing with everyone else looking to rent them out.

Food for thought...nom nom.

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On 4/19/2019 at 10:40 PM, DerekT said:

Have you considered the alternatives for your budget and location? 

I know it's slightly further out, but if you widen the postcode search there are well built freehold 2-3 bed terraces that are already built and ready for tenants so you're earning from month one rather than having your deposit locked away in escrow for over a year?  Probably generates the same net yield and ROI, the guaranteed rent will probably already be factored into the PP and if all flats come online at the same time, you'll be competing with everyone else looking to rent them out.

Food for thought...nom nom.

Only limited knowledge of Liverpool, but from what I've read and see travelling around, the cheaper terraces around the city centre are areas to avoid. Suspect they could lead to voids and tenant issues. City centre looks good or then a bit further out (Crosby, Mossley Hill, Aigburth etc).

As for the off plan deal, I've never done one for the same reason I wouldn't do this - rent will be included in the purchase price and at the end of 3 years everyone will be trying to rent out at the same time; got to buy their furniture pack - er, no; £40k tied up with zero return (saving the developer 10-12% finance fees); protection if developer goes bump and doesn't finish it?

I suspect for your budget you can get something already built that would rent easily for a similar figure and therefore be earning from day 1

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