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REASONS TO INVEST

Overseas property as an investment

Investment Property, capital appreciation & rental yields.

Projected growth:

Cape Verde and Morocco are enjoying sustainable growth in their economies, tourism and the local housing markets, which will be reflected in unparalleled returns to investors.

Recent reports evidence capital growth in the region of 15% - 20% per annum across both markets with future forecasts in line with 30 – 40% continued growth over the next two years.

Projected returns:

Massive increases in tourism and demand for quality self catering accommodation are reflected in the potential rental yields or capitalization rates for this type of property.

The numbers of UK tourists to the Islands increased by an unsurpassed 800% between 2006 and 2007, this sector is now the second largest group of travelers to the islands. A recent Mintel report evidenced that 60% of all UK tourists now opt for self catering accommodation – with over 30% of those booking their holidays online direct with the owners. These factors alone display the true potential and demand for quality self catering accommodation, which is currently in apposition of massive undersupply.

Basing our forecasts for rental returns on current pricing levels on the islands we are able to predict a minimum net rental yield of 8.6% up to a potential 15% net return per annum variable on how the rentals are achieved. Full details are listed in the examples below:

Realistic Forecast Rental returns Calculations of Net Yields have been provided, based on the following assumptions:

Two Bedroom Resort Apartments

Liquid Cash Required: €50,000 + €30,000 = €80,000
(50,000€ required on Deposit – 30,000€ payable 2010)

Using a two-bedroom apartment on the five star Paradise Beach Spa development on the Island of Sal for illustrative purposes the capital investment requirement for freehold purchase is:

Liquid Cash Required: €50,000 + €30,000 = €80,000

Weekly Gross Rental Income A standard two-bedroom apartment (sleeps 6) currently rents for the same amount as a standard hotel room (sleeps 2).

Cost per night for one bedroom in a four star hotel on the Island of Sal:

125€ per night (calculation based on: The Morabeza Hotel, Sal, Cape Verde)
875€ per week (calculation based on seven nights)

Annual Gross Rental Income - 35,000€ per annum Forecast rental income based on a 40 week basis at a conservative 75% occupancy rate (allowing for three months of the year unrented or for personal use) will generate 35,000€ per annum (Calculation based on weekly rate for a single room in the Morebeza Hotel).

There are two main options available for the rental of self catering accommodation:

Option 1. Property is rented via a local property management company – providing a net Annual Yield of 10%
Option 2. Property is rented direct by the owner via one of the various property rental portals – providing a net Annual Yield of 17%

According to a Mintel study relating to holiday booking trends – 60% of all UK tourists now book self-catering accommodation with in excess of 35% being booked directly with the owners online, illustrating the demand for owner direct bookings.

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Associated Finance / Mortgage Costs – 13,348€ per annum - Associated costs of freehold ownership based on a 15 year mortgage at 7.5% would require an amortized monthly payment of 1,112.41€.
Property Management Fees – 8,750€ - 25% management fee contract with local letting agent calculated at 8,750€ (calculated @ 25% of gross rental income).
Community Fees and Taxes – 1,200€ - Local community fees and taxes calculated at 1,200€ per annum.
Insurance – General Contents and Household Insurance calculated at 400€ per Annum.
General Bills – Household Utility Bills calculated at an average of 980€ per Annum.
Total Capital Invested – 94,000€ - Initial Capital Investment of 80,000€ plus complete furniture pack required for self catering rentals valued at 14,000€ equates to a total initial investment of 94,000€
Direct Marketing - with high profile property rental portal – 200€ per annum
Cleaning fees & laundry – based on 50€ per week rented – 2,000€