How to use the property details screen

This page describes the entries on the property details page, what they are used for and how to fill them in correctly to get the best use out of the system.

Investment details section

This section covers the nuts and bolts details about the property - how much it will cost you to buy it and what returns you will receive.

Generator / accelerator

Generators are high-income cash-positive properties which are ultimately used to provide rental income in retirement. Accelerators are low-deposit capital growth properties, which are expected to be sold to pay off the remaining mortgages on the generators.

The distinction between generators and accelerators is a crucial one which lies at the very heart of what the system does. The software will attempt to pay off all the mortgages on the generators as quickly as it can, optionally using the rental income from the entire portfolio to help in this. When you have enough equity in your accelerators, after capital gains tax has been deducted, to pay off the remaining mortgages on the generators, then the system can optionally sell the accelerators and show you how much rental income you can expect to receive from your now mortgageless generators.

Type of property investment

  • Commercial / Residential / Overseas - these options tell the system which assumptions to use for rental and capital growth.
  • Fund - use this option for non-property-related investments. The various fields about mortgages and running costs will disappear, as they do not apply, and you will instead be allowed to enter details of any monthly contributions you may make to the investment.

Value today

This value is used as the starting point for our calculations about capital growth and available equity. It is not necessarily the price which you paid for the property, but the current market value of it.

Acquisition price for CGT calculation

This is the amount which you actually paid when you bought the investment, or the market value of the investment at the time you acquired it through other means, for example through inheritance. This is the base value used for calculating capital gains tax when the property is sold.

If this field is left blank or as '0', then the capital gains tax will be based on the value today.

Gross rent p.a. or Gross yield

How much rental income will this property produce, before any deductions are made? The value can be entered either as a cash amount or as a percentage of the value today, and it will increase in line with the appropriate rental growth assumption.

The gross yield on acquisition price is for informational purposes only, and shows the how much income the property makes as a percentage of the amount you originally paid for it.

Cost to buy

The total cost to buy is not directly editable but is the sum of the finder's fee, the mortgage deposit, any legal costs, stamp duty, any mortgage fees, furniture costs and any other costs. This shows how much total initial outlay is required to purchase the property and can be used to show how many £ return you will receive for each £ invested.

I already own this property

This flag shows as a handy reminder of which properties you still need to purchase to complete your portfolio. It is also used in conjunction with the intended date of purchase to tell the system when the property should start being included in the calculations. If this box is ticked, then the property will always be included in the calculations from day 1.

(Intended) Date of purchase

When did you buy this property, or when do you intend to buy the property if you do not already own it? If you already own this property, then you can safely leave this field as '0's and the system will include the property in calculations from the start. If you intend to purchase this property in the future, then use the calendar to pick the date at which you expect the property to start generating rental income for you.

Assumed number of weeks void

Most properties are unlikely to be fully tenanted all the time over a period of a number of years. In assuming that a property will be untenanted for a given number of weeks each year, the appropriate level of rental income is deducted from the earnings. The management charge will not be charged during this period, but any rates payable will be deducted from furnished property.

For certain types of investment property, e.g. student accommodation, the actual number of weeks void could be negative. This is because rental income from student properties is only expected to be collected during term time and so, while the property is technically untenanted outside these times, from the point of view of forecasted income the property is let 100% of the time. If you also expect to be able to rent out the property for some weeks during the summer holidays, then setting this field to a negative value will allow you to model additional income above the norm.

This is my home

The system can be used to pay off any mortgage(s) you may have on your home(s). If a property is marked as being your home, then many of the fields associated with costs become redundant and so are hidden from view. Homes are treated as generators regardless of whether or not they generate rental income (e.g. you may rent out your second home for part of the year). Their mortgages will be paid off according to the same rules as other generators and the amount remaining will be added to the required amount of equity in your accelerators.

Assumed rental growth

This shows the rate at which this property's rental income will grow each year. The default value is taken from your assumptions page, but by ticking the override rental growth assumption checkbox you can manually override the assumption for an individual property.

Assumed capital growth

This shows the rate at which this property's value will grow each year. The default value is taken from your assumptions page, but by ticking the override capital growth assumption checkbox you can manually override the assumption for an individual property.

Initial mortgage details

This section covers the details of this property's current mortgage deal, or the mortgage which you expect to be available for future purchases.

Mortgage or Loan to value

What is the outstanding amount on the mortgage, expressed either as a flat value or as a percentage of the value today?

Mortgage repayment type

This determines how the mortgage on the property will be paid off. This setting applies both to the initial mortgage and to the reversionary mortgage, if a reversionary mortgage is applicable.

  • Interest-only - no attempt will be made to repay the capital amount using rental income. This type of mortgage will only be repaid by selling the accelerators. Typically mortgages on accelerators will be set to interest-only.
  • Net balance repayment - this type of mortgage will be paid off as quickly as possible, either by using the rental income from this property or by pooling the rental income from all properties in this portfolio. Typically mortgages on generators will be set to net balance repayment.
  • Fixed term repayment - this type of mortgage will be paid off by using a fixed amount of rental income each month for the specified period. If you choose this option you cannot remortgage this property using the reversionary mortgage section.

Mortgage interest type

What type of interest rate is applied to this mortgage?

  • Baserate tracker - the mortgage margin above base rate will be added to the appropriate base rate from your assumptions to produce the final interest rate.
  • SVR - the mortgage margin above base rate will be added to the appropriate base rate from your assumptions to produce the final interest rate.
  • Fixed rate - the mortgage rate given will be used.

Minimum monthly repayment

On most interest only and net balance repayment mortgages, the lender only requires you to pay off the interest on the loan each month. As the system automatically calculates and pays off the interest due each month, you do not need to enter a value.

If you are on a capital repayment mortgage and your mortgage provider insists that a minimum amount be paid each month, then this will be taken off the total mortgage outstanding before any rental income is pooled or mortgage overpayments are made.

Maximum annual capital overpayment

If your mortgage provider will only allow you to pay off a particular percentage of the outstanding loan amount each calendar year, then any available rental income above this amount will either be used to pay off other mortgages or will show as rental income on the charts. Lenders will often limit overpayments to 10% of the outstanding loan amount during the initial term.

Please note that this can result in rental income being shown even when you have opted to use excess rent to pay off the mortgages.

If your lender does not impose a limit on your capital repayments, use 100% for this field.

Initial term expiry date

When does the initial mortgage term expire, or when do you expect to remortgage the property? Once the calculations reach this date the system will start to use the reversionary mortgage information.

Reversionary or remortgage details

This section covers either refinancing your property or the rate to which your mortgage will revert after some initial period. For example, your mortgage might have a fixed rate of 3.99% for 2 years, with a maximum annual capital repayment of 10%, but after 2 years it might switch to the lender's standard variable rate with no maximum annual capital overpayment limit.

Reversionary mortgage interest type

Equivalent to mortgage interest type above.

Remortgage rate / margin above base rate

Equivalent to mortgage rate above.

Refinancing amount or Target LTV

The amount of equity you wish to withdraw when you refinance the property. This can be entered either as a flat amount or as the loan to value ratio using the value of the property at that time, i.e. after capital growth has been applied to it. If you choose the LTV option, then the mortgage remaining at that time will be compared to the target LTV and the difference will be withdrawn.

You can use this option to provide capital to finance the purchase of another property. The costs of such purchases and the equity released in this manner will show up in the cashflow chart of the main calculation.

Minimum monthly repayment

Equivalent to minimum monthly repayment above.

Maximum annual capital overpayment

Equivalent to maximum annual capital overpayment above.

After the initial term has expired lenders do not usually impose a limit on capital repayments. If that is the case for your mortgage product, enter 100% in this field.

Costs Details

This section covers sundry costs associated with running the property. These costs will rise in line with your inflation assumption.

Management charges

The percentage of the rental income which will be deducted by your management company. If you manage the property yourself then set this field to 0. If you select "Add VAT" then VAT will be added to the management charge.

Service charge, Ground rent, Property repairs, Landlord insurance cost, Gas safety certificate cost, Letting Fee, PAT testing fee

All these amounts are summed to produce the total annual running cost of the property. This total cost will be deducted from the rental income before it can be used to pay off any mortgages. These values will grow in line with your inflation assumption.

Landlord insurance end date and Gas safety certificate end date

These dates will remind you when you need to renew your landlord insurance and gas safety certificates.

General details

This section covers miscellaneous details about the property, most of which are for informational purposes only and many of which are self-explanatory.

In which portfolio does this property belong?

You can move this property to different portfolios using this setting.

Include this property in calculations?

By setting and unsetting this flag you can see what impact on a portfolio an individual property can have. For convenience, you can also toggle this setting by clicking on the tick or cross in the 'Active' column on the homepage.

EPC end date

A reminder of when you need to renew your Energy Performance Certificate. As these last for 10 years it will be a handy reminder of when it runs out.

Rates payable

If the property is fully furnished then you will be liable to pay rates when the property is untenanted, i.e. during the number of weeks void.

Comments

You can use this to store any notes or comments about this property. It might be useful to store contact details of service providers related to this property.





 
 
 
     
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