How to turn £15k into £50k and generate £15k income Article Published: 13:48 12/05/2006 Article Classification: La Envia Golf Apartments Almeria
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We asked Olive Tree to introduce us to a client who would be prepared to be used as a case study for the new property investor....

We spoke with one of Olive Tree's clients about his buy to let experience over the last few years and asked if he would share some of those experiences with our website members. 

Mr H. lives in the West Midlands and has a full time job as a Production Manager in a large Engineering firm. He earns around £47,000 per annum and his wife has a part time job paying approximately £9,000 a year. 

His home was valued at £124,500 in 2002 with an (interest only) endowment mortgage outstanding of £75,000, giving him £49,500 equity.  He had various other savings, but was prepared to invest up to £20,000 of his cash savings into a buy-to-let property, in addition to any new mortgage.

He decided to buy a 3 bedroom house in the Midlands, which cost him £55,500. He used £15,000 to cover the deposit and other costs and took a 75% interest only mortgage for £41,625. This cost him approximately £242 per month including insurances.  

“It took me about two months to rent it out through a local letting agent. I wasn’t overly concerned about the delay, because I had put aside the best part of a year’s mortgage payments just in case anyway. I must admit I was relieved though when they called me to say they had a tenant as this was the first time I’d done anything like this.” 

“My rental income was £285 per month after fees, leaving me a gross profit of £43 per month”. 

Mr H had the house revalued in 2004 at £66,700 and decided to take a remortgage and release £15,000 of his new equity. This took his mortgage to £56,625.  

He decided to use the £15,000 as a deposit to buy a 2 bedroom apartment in the Costa de Almeria region of Spain in Mojacar, which cost him £75,000. He had a £60,000 mortgage, but as this was an ‘off plan’ development and therefore hadn’t yet been built, the mortgage payments didn’t commence until completion, 12 months later. 

In March of this year Mr H sold his property in the West Midlands for £74,500 and obviously paid off the £56,625 mortgage, leaving him a gross profit of £17,875, most of which he used to pay a lump sum off his Spanish mortgage leaving him £45,000 on a new built apartment which is now valued at £98,500! 

“I am really delighted that within four years my initial £15,000 investment has turned into me owning an apartment in Spain worth nearly £100,000 with £53,500 equity”  

As Mr H has a Euro mortgage, his payments are approximately £155 per month and his rental income has been averaging £1,650 per month. A profit of nearly £1,500 per month! 

“I don’t expect to be able to rent for the whole of the year, but you never know. Because the weather is so good for most of the year, we are thinking of taking a long break over there ourselves probably in November” 

Mr H is just in the process of buying an off plan apartment from Olive Tree in Bansko Bulgaria for £58,000. 

“The guys at work have started to call me a 'property dealer', but I think it’s just another way of investing. I certainly think the returns are better than the building society and it’s much more fun.” 

We calculated that Mr H’s original £20,000 that he had in the building society in 2002 should now be worth approximately £22,075.  Whilst the £15,000 that he invested in property at the same time has helped to generate £53,500 worth of equity and a gross rental income of £1,500 per month.

Not to mention the opportunity of free accommodation in a place in the sun. It certainly makes you think!