How to Get to Millionaires Row

photo credit: Raul_d50 ** No Video! **Scotland has shown a sharp rise in the number of properties it has selling for over 1 million pounds. In 2006, 144 £1m properties were sold in Scotland, but that rose to 343 £1m properties in 2007.

Only London outstripped Edinburgh for the number of properties sold for in excess of 1 million or more last year. This is quite a funny statement really, because all cities in the world tend to compare themselves to London.

The total number of house sales in excess of £1 million pounds within Great Britain rose by 30% in 2007 to 8,257, so London leads the way by a very long margin.

Financing a £1 Million Property Investment

So how much money would you need to finance a £1 million pound investment property, and how do the figures work? I will use and example of a five year fixed mortgage that I found on The Money Centre’s website.

The product I chose is a 5.89% five year fix, with an 80% LTV and 125% rental cover. LTV means Loan to Value, so the lender will lend 80% or £800,000 which will cost £3,926.67 per month. It doesn’t sound so bad if you say it quickly.

The lender in this case requires 125% rental cover, which means they need to be sure that you can rent the property out for 1.25 x £3,926.67 which is £4,908.34. The purpose of the rental cover is to provide a buffer for void periods while your property has no tenants. So the lender needs to make sure that you are making a profit of at least £981 per month.

You can do it if you think big

Buying a property in this way is more accessible than you think, and virtually every man and his dog can do it. This is because lenders are lending money against a business proposition, which they will verify themselves to ensure that the property stacks up for both capital value and rent. If they are not satisfied that the property meets the valuation – they won’t lend.

Property investing and property investment is about being shrewd, being dynamic and being on the ball. A property investor sees opportunities to make money and works out how to make a purchase – you would be surprised what can be achieved with a little ingenuity. Investment opportunities are all around, you just have to look.

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