I have been meaning to create this table where you can easily see what sort of returns you can make from investing in BMV properties.

I wanted to be able to show the annual percentage return you could get and make this a direct comparable figure with what you could expect from a bank.

The two key variables you need to ask yourself is:

1. How long you do you think you will have to wait for property prices to go back to their peak levels seen in 2007
2. What percentage BMV properties are you going to invest in i.e. 35% BMV, 30% BMV etc.

Then based on this you could get an annual return you could expect if your prediction was right.

Well after a lot of playing about with excel I have come up with the table!  Here it is:

Annual return expected based on the number of years
to recovery and the type of properties invested in

	Type of property invested in
Number of years to recovery		35% BMV	30% BMV	25% BMV	20% BMV	15% BMV
	1	5000%	833%	455%	313%	238%
	2	2500%	417%	227%	156%	119%
	3	1667%	278%	152%	104%	79%
	4	1250%	208%	114%	78%	60%
	5	1000%	167%	91%	63%	48%
	6	833%	139%	76%	52%	40%
	7	714%	119%	65%	45%	34%
	8	625%	104%	57%	39%	30%
	9	556%	93%	51%	35%	26%
	10	500%	83%	45%	31%	24%

So using this table if you thought that prices will recover back to 2007 levels in 6 years and you were going to invest in 25% BMV properties or above only you could expect a minimum return of:

	Type of property invested in
Number of years to recovery		35% BMV	30% BMV	25% BMV	20% BMV	15% BMV
	1	5000%	833%	455%	313%	238%
	2	2500%	417%	227%	156%	119%
	3	1667%	278%	152%	104%	79%
	4	1250%	208%	114%	78%	60%
	5	1000%	167%	91%	63%	48%
	6	833%	139%	76%	52%	40%
	7	714%	119%	65%	45%	34%
	8	625%	104%	57%	39%	30%
	9	556%	93%	51%	35%	26%
	10	500%	83%	45%	31%	24%

That is a 76% return on your money every year for 6 years.  That is to say if you invested £10,000 in 25% BMV properties and prices recovered in 2015 you would make:

£10,000 x 76% = £7,600 EVERY YEAR

Now you would not get £7,600 religiously every year.  You would get nothing for the first 5 years and 11 months but when you sell out you would get:

£7,600 x 6 = £45,600 profit.

That is from a £10,000 investment.

For those who want to see the workings I have attached the excel worksheet so you can play with the numbers.  I have ignored compounding the interest so the return figures are a bit rough and ready but pretty much on the ball (only the accountants and mathematicians will find fault!).

One figure that really got me excited and I am sure it did to is if property prices recover in one year and you only invest in 35% BMV properties.  Your return would be an astonishing 5,000%!!!!

That means £10,000 invested would be:

£10,000 x 5000% = £500,000.

That is scary but real.  So I ask you what would you do if you had £10,000?

Let me know.

Ajay

Posted on: 17th Jul 2009