3 Bed Terrace house purchased for £190K would require £74 150 from the investor to purchase and cash flows £1180.42 per month after all costs.
Key performance stats
ROCE : 19.10%
ROCE plus growth predictions = 31.92%
The magic happens after 6 months when we go back to the bank and have the property refinanced at its new value. In this case the value came in at £220K which means we are able to pay down the investors loan to £51 650 whilst the property is still generating a whooping £1124.17
Key performance stats
ROCE : 26.12%
ROCE plus growth predictions = 47.42%
Overtime as the investors loan is repaid the ROCE increases until we are earning an infinite return and the investors loan is paid back in full.