How it works
Firstly: an example of Regius Homes buying a property for renovation.
- Purchase price £350,000
- Renovations £60,000
- Sale price £490,000
So far so good, a solid profit of £80,000, now lets look at all the fees a typical developer like us will pay.
- Solicitor fees buying and selling £3120 (inc VAT)
- Estate agent fees £8,820 (1.5% rate of commission plus VAT)
- Bank fees. Normally we finance 30% with a bank. They normally charge a 2% arrangement fee, and a rate of around 6% pa. Therefore lending of £123,000. Working on a 6 month timescale. Total bank fees £6,150.
- Stamp duty. As a company we pay the stamp duty surcharge, therefore we would pay 8% duty. Total, £28,000.
- Total costs: £46,090
- Gross profits £80,000 minus fees £46,090 = £33,910
How it works
Secondly: same renovation but using our model of shared equity increase.
- Guaranteed agreed value £350,000
- Renovations £60,000
- Sale price £490,000
Again we see the increase in value of £80,000, but in this example the homeowner would receive the sale price of just £350,000 minus selling fees of £6,300 for Estate agents, and £1,560 for solicitors. Giving a total of £342,140
- Legal and Estate agent fees are shared, each party would pay £5,970 (total £11,940)
- Homeowner receives guaranteed agreed value of £350,000
- Regius Homes receive their development costs of £60,000
- Profit minus share of Estate agent and solicitor fees £68,060
- New total received by homeowner £384,030
- Regius homes receives half profit = £34,030
As you can see, our profit is almost identical to purchasing the property, but we have returned an extra £34,030 to the homeowner.
