£100,000 Crowdfunded High Yield Investment
Crowd2Let identify a suitable modern 2-bed semi-detached house in a popular location in North East England. The vendors are very eager to sell for financial reasons. The asking price is £99,950 and we negotiate hard to agree to purchase the property on your behalf at £88,000. The property had been worth circa £120,000 in September 2007.
The property requires full redecoration, re-carpeting, some light maintenance and preparation for letting. The cost of this refurbishment plus all other costs associated with sourcing, purchasing and letting the property are included in the original £100,000 investment “package” price. Legal costs for the purchase, along with building and contents insurance premiums for the first year, are also included.
A detailed property report outlining a full breakdown of all of the projects costs is made available to a Crowd2Let investor when they have registered and logged into their personal dashboard. Investors read the report and decide to invest in the property in multiples of £500. To keep the math’s simple we will say in this example that 100 people eventually crowdfund the investment with £1,000 each, ie the £100,000 full package price. An SPV is created for the 100 landlords as described in How It Works.
The property is refurbished then let at £550 per calendar month and each of the 100 investors earns £4.84 per calendar month in rent or £58.08 per annum after deducting our 10% plus VAT management fee. The return is of course proportional to the initial investment, ie if an investor had invested £5,000 in this property they would receive £24.20 per month in rent.
This is a 5.8% annual yield on each £1,000 net cash investment.
The refurbished property is independently valued in the current market at £105,000 which is £5,000 more than the total amount invested representing an “instant” equity increase of 5%. Realistic anticipated capital growth of 4% per annum over a 10 year cycle would increase the value of the property to £155,000 at the end of the 10 years. This would mean that each investors initial £1,000 share of the property would now be worth £1,550 in addition to the monthly rent they had received!
This is a gross combined Yield plus Capital Growth asset backed return on your investment of 15% in year 1 alone.
Notes:- Examples for illustration purposes only. Actual package prices and achievable rents will vary from property to property. As with any investment yields and capital values can go down as well as up. The property may take some time to let and void periods may occur. Crowd2Let do not guarantee rental incomes or post refurbishment values in any way and ongoing maintenance costs may be incurred in the future. Income tax and capital gains tax may be payable. Crowd2Let are not financial advisors. We act as an agent sourcing, maintaining, letting and managing residential properties on behalf of investor clients.