Investment Example

An example of a gifted deposit deal.

The main advantages of using genuine gifted deposit deals are:

The 15% deposit usually required by the lender (when obtaining an 85% Buy to Let mortgage) is not required, the 15% discount is used by the lender as the deposit.

The price paid for the property is 15% below the market value of the property; therefore you instantly obtain profit (in the form of equity) of 15% of the market value.

Example:

List Price: £175,000
Less Discount: (15%) £26,250
Purchase Price: (net of costs) £148,750

Capital growth calculations at 8%

Year 1 £175,000 × 8% = £189,000
Year 2 £189,000 × 8% = £204,120
Year 3 £204,120 × 8% = £220,450
Year 4 £220,450 × 8% = £238,086
Year 5 £238,086 × 8% = £257,133
Year 6 £257,133 × 8% = £277,704
Year 7 £277,704 × 8% = £299,920

Therefore capital growth over seven years is:

Cost: £148,750
Value: £299,920
Gain: £151,170

Capital growth of 102% over seven years. Therefore, a return of 102% (property has doubled in value) in seven years without having to find the deposit to buy the property initially.