5 year mortgage is worth?

2 Replies

Hello everybody. So as time comes to get the money from my deal where I sold a house with a 40,000$ profit I am going to buy 2 other properties. The one I want to ask about is in Scotland now. This is just a thought process and I want others opinion on it before I rush this as its far from where I live. So the property is 30,000£ with no need of repair in a quiet small city. I want to leverage debt. If I get a loan of 70% of the house-21,000£ for 5 years and APR of 8% (i use this rate for a worst case senario, but i am sureits not that high) 10% cost for closing deal that makes a 12,000£ investment. The monthly payment is 438.30£ for the mortgage x60=26,298£ total payable amount. I will charge 460£ pm and that makes a cash flow of 21.70£pm or 217£pa. for 5 years that makes 5x217=1085£ and a fully paid house. For another 5 years I charge 460£pm, thats 460£pm chash flow or 4,600£pa. that’s 5x4,600=23,000£ a ROI of little more than 100%. Lets say that the value doesnt change and I have an equity of 30,000£ and options to sell or take out the equity. At the end of the 10 years I sell it I will have a good ROI of 350%. Should I go for this strategy (60x21.70£ and then 60x460£ then sell/take an equity loan for a new property) or this strategy doesn’t work/ is bad?

In Scotland you have no repairs, maintenance, replacements of roofs, heating systems, vacancies, property taxes, insurance costs, etc. and you want to manage this from afar?

@Wayne Brooks While I was thinking about this strategy I have put the isurance, taxes and other costs in the 8% with a contract that the tenants will pay the bills, and a vacancy of 2 months in every yera + the house was just refurbished so no need of extra costs but if necessary I wll beable to pay if needed.