SHOULD I BUY WITH A MORTGAGE OR CASH?
As an example, if a property was £100,000 and rented for £5,000 per year your yield would be 5%. If you invested purely with cash, your return on investment would be 5%.
However, if you purchased with a mortgage, the figures might look something like this:
Purchase Price: £100,000
Annual Income: £5,000
Annual Mortgage Payments @ 2.5% Interest: £1,875
Net Annual Income: £3,125
Return on Investment: 12.5%
For the purposes of the above example we haven’t factored in any stamp duty or legal/broker fees, or taxes, however you can see the difference in return.