Example 4: £100,000 Small Note
£100,000 9%pa Fixed Income Promissory Note over 3 Years.

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Step 1: Sign the note
Example 4: £100,000 9%pa Fixed Income Promissory Note over 3 Years.

A promissory note is drafted and signed by the investor and one of the partners of Adavo Property.

Step 2: Place capital on account in escrow
Example 4: £100,000 9%pa Fixed Income Promissory Note over 3 Years.

£100,000 is lodged with Chadwick Lawrence LLP solicitors in a designated escrow account. Chadwick Lawrence are the sole signatories on the account and can only release money in accordance with the promissory note terms and conditions. Your interest begins on the day that the money hits the account.

Step 3: Property allocated
Example 4: £100,000 9%pa Fixed Income Promissory Note over 3 Years.

The next suitable property available is allocated to this specific note and its purchase is progressed. Professional fees relating to the purchase (such as RICS survey fees, searches etc) are drawn down in accordance with the terms of the note. The property will be around £95,000 in value (confirmed by an independent RICS valuation) and we will aim to buy it for around a 15-20% discount. This means an expected purchase price of around £80,000 which leaves around £20,000 for renovation, fees and contingency.

Step 4: Purchase completion
Example 4: £100,000 9%pa Fixed Income Promissory Note over 3 Years.

Once the conveyancing has been completed and all valuations, searches etc have came back without issue we then complete the purchase. The purchase price is drawn down from escrow and a legal charge over the asset is immediately arranged.

Step 5: Same day legal charge
Example 4: £100,000 9%pa Fixed Income Promissory Note over 3 Years.

Your capital is either in escrow or backed by a first legal charge over the property. The legal charge will be for the full RICS value of the property giving additional cover above and beyond your capital advance. This is arranged on the day of completion and will be the only charge lodged against the property. As per the terms of the note we are legally obligated to seek your approval before any other charge is arranged, giving peace of mind that you are the only creditor in the queue for that asset.

Step 6: Renovation
Example 4: £100,000 9%pa Fixed Income Promissory Note over 3 Years.

The renovation works take place over a 4 week period and usually increase the value of the property by around 10-15%. The renovation fees in this example would be expected to come in around £15,000-£20,000 ensuring that the £100,000 note value will be able to cover all costs associated with the process. The renovation costs are drawn down in 3 stages; 50% upfront to pay for the bulk of materials, 25% at the halfway stage and 25% upon completion of works. Noteholders are welcome to visit the property and check up on progress.

Step 7: Sell the property
Example 4: £100,000 9%pa Fixed Income Promissory Note over 3 Years.

We begin to market the property during the conveyancing stage and have usually placed the finished property with an existing investor by the completion of renovation works. If for any reason the sale is not already arranged we market the property via existing networks and partners. A well presented property in show home condition that yields 10%+ from rent is expected to sell on the open market inside 4 weeks.

Step 8: Capital returned to escrow
Example 4: £100,000 9%pa Fixed Income Promissory Note over 3 Years.

On the day of legal completion of the sale the original £100,000 capital is returned to escrow. The whole process is expected to take 5/6 months from start to finish. This allows two cycles per year.

Step 9: Interest paid
Example 4: £100,000 9%pa Fixed Income Promissory Note over 3 Years.

At the end of each year the accrued interest is paid. In this example of a £100,000 note with a 9%pa coupon we would pay £9,000 in interest at the end of the year. This is transferred each year via BACS to your designated account. The income is fixed and not subject to any movement in the market.

Step 10: Repeat the cycle
Example 4: £100,000 9%pa Fixed Income Promissory Note over 3 Years.

Over the course of the three years we would expect to use the capital around six times; with a six months period for cycles of any value. This will entail six seperate legal charges and each time a property is sold, the charge is then released and the money returned to escrow ready for the next purchase. This limits the effect of any movement in the general UK residential market as your charge is against several properties with recent valuations and usually only lasts 3 or 4 months. This is preferable to a single charge over the three years as its value would then ebb and flow with the market.

Step 11: Capital repaid
Example 4: £100,000 9%pa Fixed Income Promissory Note over 3 Years.

At the end of the term the capital is repaid along with the final interest due. In this example the original advance of £100,000 along with the last interest payment of £9,000 is transferred on the date of redemption. A total of £27,000 has been earned while enjoying 100% capital protection.


View Example 5: Early Redemption >>


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