Investors paid 113.43p per share in the New Listing for this property, and it became available on the Resale market December, 4th 2017. Based on this share price, and third party forecasts for the region, the estimated total return is 48% over 5 years.
Owing to 0.5% stamp duty being applicable to Resale Market purchases and not New Listing purchases, investors on the Resale Market would need to purchase at an average price of 112.88p per share to achieve these same returns.
Invest near the Northern Powerhouse of Newcastle upon Tyne. This portfolio of 19 houses in Fenham boasts an extremely strong yield for residential, contributing to an attractive total returns story.
Situated in a well-established residential area just 2.7 miles from Newcastle’s city centre, the properties are recently refurbished, have private allocated parking, and enjoy a number of local shops, restaurants and amenities within close proximity.
View a short video from our Director of Property to learn more.
- The investment comprises 19 houses on Friars Way & Abbotsmeade Close, Newcastle upon Tyne. We purchased the properties at a 10% discount by buying in bulk. The discount more than covers the purchase costs of 4.8% (stamp duty, mortgage fees, etc) providing a platform for above average capital growth and a degree of downside protection, in addition to the dividend
- Our exit strategy is to sell the houses individually rather than as a single investment, thereby realising the discount that we have secured from buying in bulk. Being 19 houses in a well-established area, they lend themselves to individual sale
- Leading research agencies Savills, Knight Frank, JLL and CBRE, have predicted house price growth in the North East of 9%, 9.3%, 7.1% and 7.2% respectively, over the next 5 years (correct as of 31/10/2017). The average of these predictions is 8.2% and once geared by the mortgage debt would deliver 5-year capital growth of 23%, based on selling the units individually. Once the dividend yield is added, this would equate to a total return of 48% over a 5-year period based on the New Listing price of 113.43p per share and after deducting all costs of purchase (including the initial Property Partner transaction fee) and accounting for corporation tax on the capital gain, if the houses were sold at this value. Owing to 0.5% stamp duty being applicable to Resale Market purchases and not New Listing purchases, investors on the Resale Market would need to purchase at an average price of 112.88p per share to achieve these same returns
- The property is mortgaged at 50% loan-to-value (LTV) of the purchase price. The mortgage gives enhanced exposure to property price movements, and the potential for amplified returns; though investors must note amplified negative returns if prices fall
Our investment comprises 19 houses (15 three-bedroom houses and 4 two-bedroom houses). By purchasing the properties in a single transaction, we were able to offer the vendor a fast and professional service from an experienced buyer. This, combined with our previous track record enabled us to secure a reduced purchase price of £2,070,000 for these properties versus a Chartered Surveyors Valuation of the units if sold separately of £2,300,000. By purchasing these houses at a bulk discount investors will benefit from a higher dividend yield than would be achieved by purchasing individual units.
The total rent forecast for the 19 houses is £151,500 per annum. The number of vacant houses may vary month to month. For prudence we have factored into our forecasts an annual void rate of 3.8% and have not included any growth in rental values.
At the forecasted level of rent, Gross Rental Yield would be 7.32% and the forecast Dividend Yield 5.04% (fully accounting for and after mortgage interest payments, purchase costs, furnishings, forecast maintenance, annual voids, corporate taxation and all fees). Since April 2016 UK taxpayers are entitled to a £5,000 annual dividend allowance. See our FAQs here for more information.
The mortgage will be provided by a major high street bank with an anticipated five-year fixed interest rate of approximately 3.8%. After this five-year period, the interest rate will switch to a variable rate based on the bank's base rate. At that point, we will assess the situation and either continue with the variable rate or fix the interest rate for an additional period if necessary. Please refer to our blog post on geared property for further details.
The properties were acquired in good condition, and the Chartered Surveyor's report identifies no material issues. Having been recently refurbished we have set aside a contingency of £9,500 for any issues that are identified after purchase. There is also a total provision of £3,800 for furnishings.
The houses are held on a high-quality leasehold basis, with over 100 years remaining at a peppercorn ground rent (effectively nil rent). The Freeholder is Newcastle City Council.
This transaction was approved by our RICS qualified Director of Property.
The investment comprises 19 houses - 15 three-bedroom houses and 4 two-bedroom houses.
There is allocated parking available to tenants.
We present here floorplans for 2 of the houses as examples.
- Share Valuation
- House Price Index
- Rental Income Breakdown
- Latest Valuation
- Latest Share Valuation
- Latest Property Value
- Amortised Purchase Costs
- - £1,045,350
- Latest Valuation
Note: The estimates provided do not constitute valuation advice; it remains your responsibility to determine valuation.
The HPI is an official statistic that captures changes in the value of residential properties across England and Wales. It is published by the Land Registry, which is a UK government organisation.
Note: Past performance is not a reliable indicator of future results.
Residential property investment is a total returns product. This information is the income component only. Increasing capital values have historically driven most of the return.
- Gross Rent per year (E)
- Service Charges
- - £0
- Gross Rental Revenue
- = £151,500
- Gross Rental Yield
- - £92,922
- Annual Interest Payment
- Letting and Management
- Property Insurance
- Allowance for possible voids
- Maintenance Allowance
- Corporation Tax
- Dividends per year
- = £58,578
- Dividend Yield
Note: UK taxpayers are currently entitled to a £5,000 annual dividend allowance. This means that the total income related tax you pay is no greater than if you were to own the property directly. Gross rent and dividends may be lower than estimated. Tax treatment depends on individual circumstances and may be subject to change in future. See FAQs for more information on taxation. The Dividend Yield assumes an investment at the Latest Valuation.
Friars Way & Abbotsmeade Close, NE5 2EX,