The standard investment recommendation for any young couple is to buy their own home. I respect the reasons, and I understand the comfort factor, but I don’t think financial intelligence will ever allow me to own my own home.

I thought I’d make this more of a “practical” blog post on property investment and hope to show a different view on home ownership, so lets jump into some numbers.

The kind of home I would want to live in would cost me about £350k minimum, call me a snob, I wouldn’t want to live in anything cheaper. Mostly this is because I want to live in the country, in a nice area, with land for the horses and close to a “nicer” city. We’ve had a look at a few properties around the £650k mark – nice barn conversions with a few acres - one of these would be ideal.

To rent either of the above kinds of properties would cost anywhere from £900/month, to about £1,500/month. Likewise, if I were to own those properties and rent them out, I’d have a rental return of between 2.8% and 3.1%

Lets just say for a minute I had two options on the table, one was the £650k property above, and the other was to rent that property for £1500/month, and instead buy £650k worth of investment properties.

The UK being what it is, there are plenty of properties on the market for less than £80k which have a rental potential of around £500-£550pcm. You have to look carefully, but they are out there. These are houses I would never want to live in, but buy to lets are not “homes”. The rental return on these dives is hovering at about 7%-8%.

Spending £640k on BTL properties would leave me with 8 such properties, with a combined rental potential of £4,000/month. So to draw a direct comparison, that’s £1,500 as opposed to £4,000.

The numbers above assume you are buying these properties outright, which doesn’t make sense when I get a higher ROI sticking those amounts in a cash account, than on the capital appreciation of a property.

The real excitement comes when you look at your lump of money, get a bunch of self funding BTL mortgages, and your tenants pay off your mortgage for you.

The minimum deposit on a BTL property is currently 25% (just a few years ago you could get 110% mortgages, those were the days!). So with those numbers in mind, taking into account increases in rental potential (3%/year) and house prices (3%/year conservatively on average) you ROI figures are as follows:

Year 1: 5.05%

Year 2: 22.73%

Year 3: 41.41%

Year 4: 61.13%

Year 5: 81.93%

Year 6: 103.83%

This compares with a compound interest rate of 13% - which is a pretty nice interest rate to aspire to.

Choosing the investment properties option I’ll only spend about £830/month to rent the £650k property (because the BTL’s are earning money from day 1) instead of paying £2,740/month in mortgage repayments, making me £1,910 better off every month, or £690,000 better off over 30 years. (wow!)

This is the plan anyway… In the meantime I invest in other things while I wait out “the system” (UK Residency, UK Credit History, 3 Years Company Accounts, etc etc etc) - Being a non EEU foreigner can be a massive PITA.

I’ve dumped the full spreadsheets below for an investment property worth £80,000 with a rental potential of £500/month (7.5% rental return) over a 30 year period. It calculates costs including tax on income, lettings agents fees, landlords insurance, etc. It doesn’t calculate time left empty, which is about 6% on average in the UK.

Property Details	Value	Rent	Agents Fees	Monthly Principle	Monthly Repayments
Y1	£80,000.00	£500.00	-£50.00	£7	-£337
Y2	£82,400.00	£515.00	-£51.50	£7.68	-£337
Y3	£84,872.00	£530.45	-£53.05	£8.23	-£337
Y4	£87,418.16	£546.36	-£54.64	£8.83	-£337
Y5	£90,040.70	£562.75	-£56.28	£9.49	-£337
Y6	£92,741.93	£579.64	-£57.96	£10.20	-£337
Y7	£95,524.18	£597.03	-£59.70	£10.99	-£337
Y8	£98,389.91	£614.94	-£61.49	£11.86	-£337
Y9	£101,341.61	£633.39	-£63.34	£12.81	-£337
Y10	£104,381.85	£652.39	-£65.24	£13.87	-£337
Y11	£107,513.31	£671.96	-£67.20	£15.05	-£337
Y12	£110,738.71	£692.12	-£69.21	£16.37	-£337
Y13	£114,060.87	£712.88	-£71.29	£17.85	-£337
Y14	£117,482.70	£734.27	-£73.43	£19.53	-£337
Y15	£121,007.18	£756.29	-£75.63	£21.43	-£337
Y16	£124,637.39	£778.98	-£77.90	£23.62	-£337
Y17	£128,376.52	£802.35	-£80.24	£26.14	-£337
Y18	£132,227.81	£826.42	-£82.64	£29.09	-£337
Y19	£136,194.64	£851.22	-£85.12	£32.57	-£337
Y20	£140,280.48	£876.75	-£87.68	£36.73	-£337
Y21	£144,488.90	£903.06	-£90.31	£41.79	-£337
Y22	£148,823.57	£930.15	-£93.01	£48.06	-£337
Y23	£153,288.27	£958.05	-£95.81	£56.03	-£337
Y24	£157,886.92	£986.79	-£98.68	£66.47	-£337
Y25	£162,623.53	£1,016.40	-£101.64	£80.73	-£337
Y26	£167,502.23	£1,046.89	-£104.69	£101.33	-£337
Y27	£172,527.30	£1,078.30	-£107.83	£133.64	-£337
Y28	£177,703.12	£1,110.64	-£111.06	£191.49	-£337
Y29	£183,034.21	£1,143.96	-£114.40	£324.65	-£337
Y30	£188,525.24	£1,178.28	-£117.83	£952.04	-£337

Landlord Insurance	Monthly Cash Net	Years Cash Return	Years Value Increase	Years Total Return
-£15	£84.21	£1,010.49	£0	£1,010.49
-£16	£94.61	£1,135.35	£2,400.00	£3,535.35
-£17	£105.38	£1,264.52	£2,472.00	£3,736.52
-£18	£116.51	£1,398.17	£2,546.16	£3,944.33
-£19	£128.04	£1,536.47	£2,622.54	£4,159.01
-£20	£139.97	£1,679.61	£2,701.22	£4,380.83
-£21	£152.32	£1,827.79	£2,782.26	£4,610.05
-£22	£165.10	£1,981.25	£2,865.73	£4,846.97
-£23	£178.35	£2,140.21	£2,951.70	£5,091.91
-£24	£192.08	£2,304.96	£3,040.25	£5,345.21
-£25	£206.32	£2,475.78	£3,131.46	£5,607.24
-£26	£221.08	£2,653.01	£3,225.40	£5,878.41
-£27	£236.42	£2,837.04	£3,322.16	£6,159.20
-£28	£252.36	£3,028.30	£3,421.83	£6,450.13
-£29	£268.94	£3,227.32	£3,524.48	£6,751.80
-£30	£286.23	£3,434.72	£3,630.22	£7,064.94
-£31	£304.27	£3,651.27	£3,739.12	£7,390.39
-£32	£323.16	£3,877.93	£3,851.30	£7,729.22
-£33	£342.99	£4,115.92	£3,966.83	£8,082.76
-£34	£363.91	£4,366.90	£4,085.84	£8,452.74
-£35	£386.09	£4,633.12	£4,208.41	£8,841.53
-£36	£409.82	£4,917.81	£4,334.67	£9,252.48
-£37	£435.48	£5,225.81	£4,464.71	£9,690.52
-£38	£463.73	£5,564.79	£4,598.65	£10,163.44
-£39	£495.66	£5,947.87	£4,736.61	£10,684.48
-£40	£533.29	£6,399.45	£4,878.71	£11,278.15
-£41	£580.95	£6,971.36	£5,025.07	£11,996.43
-£42	£649.72	£7,796.62	£5,175.82	£12,972.44
-£43	£779.44	£9,353.29	£5,331.09	£14,684.39
-£44	£1,305.26	£15,663.12	£5,491.03	£21,154.15

Total Cash Net	Value Increase	Total Return	Total %ROI
£1,010.49	£0.00	£1,010.49	5.05%
£2,145.85	£2,400.00	£4,545.85	22.73%
£3,410.37	£4,872.00	£8,282.37	41.41%
£4,808.53	£7,418.16	£12,226.69	61.13%
£6,345.00	£10,040.70	£16,385.70	81.93%
£8,024.60	£12,741.93	£20,766.53	103.83%
£9,852.40	£15,524.18	£25,376.58	126.88%
£11,833.65	£18,389.91	£30,223.55	151.12%
£13,973.86	£21,341.61	£35,315.47	176.58%
£16,278.82	£24,381.85	£40,660.68	203.30%
£18,754.60	£27,513.31	£46,267.91	231.34%
£21,407.61	£30,738.71	£52,146.32	260.73%
£24,244.65	£34,060.87	£58,305.52	291.53%
£27,272.95	£37,482.70	£64,755.65	323.78%
£30,500.28	£41,007.18	£71,507.46	357.54%
£33,935.00	£44,637.39	£78,572.39	392.86%
£37,586.27	£48,376.52	£85,962.79	429.81%
£41,464.20	£52,227.81	£93,692.01	468.46%
£45,580.12	£56,194.64	£101,774.77	508.87%
£49,947.03	£60,280.48	£110,227.51	551.14%
£54,580.15	£64,488.90	£119,069.05	595.35%
£59,497.95	£68,823.57	£128,321.52	641.61%
£64,723.76	£73,288.27	£138,012.04	690.06%
£70,288.56	£77,886.92	£148,175.48	740.88%
£76,236.43	£82,623.53	£158,859.96	794.30%
£82,635.87	£87,502.23	£170,138.11	850.69%
£89,607.23	£92,527.30	£182,134.54	910.67%
£97,403.86	£97,703.12	£195,106.98	975.53%
£106,757.15	£103,034.21	£209,791.36	1048.96%
£122,420.27	£108,525.24	£230,945.51	1154.73%

If that makes any sense whatsoever, I’m extremely pleased to have been able to communicate a complex strategy. If not… well… story of my life I guess