Cash-flow

On the basis of a purchase price of £ 100,000, the cash requirements for the Client in the year of the property purchase may be estimated as follows:

Deposit * £  25,000
Buying costs £    4,150
Furniture / minor repairs    £    2,000
Mortgage repayment £    1,367
Operating loss for the year £    1,500
SUBTOTAL ** £  34,017

* The deposit is not paid to Anglodan but is paid directly by the Client to the Solicitor responsible for handling the transfer of the property from the Seller to the Buyer.

** To this should be added the fees of Anglodan.

In Year 2 after the property purchase, the cash requirement consists of the operating loss and the mortgage repayments, which in the Sample Calculation further above amounts to £ 2,792. In later years, the repayments will increase while interest costs will typically decline. At the same time, rental income is likely to increase more in absolute terms than operating costs. This is likely to result in the operating loss turning into an operating profit. In the Sample Calculation the first annual operating profit would be achieved in Year 10. Even so, there would still be a cash requirement due to the rising mortgage repayments.

The operating profit/loss and cash requirements of the Sample Calculation are as follows:

Year Operating
Profit/Loss		 Cash
Requirement
1 -1.500 37.542
2 -1.343 2.792
3 -1.179 2.715
4 -1.008 2.636
5 -830 2.556
6 -643 2.473
7 -449 2.388
8 -245 2.301
9 -33 2.212
10 189 2.120
11 421 2.027
12 664 1.931
13 918 1.832
14 1.184 1.731
15 1.463 1.628
16 1.754 1.522
17 2.059 1.413
18 2.379 1.302
19 2.714 1.188
20 3.065 1.071
21 3.433 951
22 3.819 828
23 4.224 702
24 4.648 573
25 5.094 441

The Selling Costs should, of course, be added to the cash requirements for the year in which the Client sells the property.

  
     

To the Top

Read about Financing