This property has been fully funded and is not currently available for investment. We are in the process of completing the purchase at which point it will move to our Resale market.
This property has a strong investment case, with a calculated total return of 44% over 5 years based on third party forecasts for the region. By agreeing to buy all six flats and the Leasehold interest in a single transaction, we’ve secured a 10.4% discount to the price of the individual flats. The exit strategy for this investment will be to sell the flats individually to realise the full discount for investors.
These 6 flats are located on Queen Street, a mere 8 minute walk from Sheffield city centre. The flats have been converted to a modern standard while retaining many of their period features. The property benefits from strong local transport links with Sheffield railway station under a mile away and providing direct line services to Manchester Piccadilly and Leeds in just under an hour. Moreover, the Government has confirmed that Sheffield city centre will be directly connected to HS2 and Sheffield Midland Station.
Sheffield itself is undergoing a major regeneration project with a new world-class Retail Quarter in the heart of the city centre, set for completion in the first half of 2019. This should contribute to continued strong demand and help underpin rental and capital values going forward.
View a short video from our Director of Property to learn more.
- The investment comprises 6 flats in Queen Street, Sheffield plus the Leasehold interest. We have purchased the properties at a 10.4% discount by buying in bulk, 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 flats individually rather than as a single investment, thereby realising the discount that we have secured from buying in bulk. Being 6 flats in a well-established location, they lend themselves to individual sale
- Leading research agencies Savills, Knight Frank, JLL and CBRE, have predicted house price growth in Yorkshire and the Humber of 10%, 13.1%, 13.6% and 13.1% respectively, over the next 5 years. The average of these predictions is 12.5% and once geared by the mortgage debt would deliver 5-year capital growth of 26%, based on selling the units individually. Once the dividend yield is added, this would equate to a total return of 44% over a 5-year period after deducting all costs of purchase (including the initial Property Partner transaction fee) and accounting for corporation tax on the capital gain, if the flats were sold at this value. The enhanced rental income promotion is paid in addition to these underlying returns
- The property is located in the heart of the Sheffield City Region, a £30bn economy with world renowned employers including Boeing, McLaren Automotive, Rolls Royce and Amazon to name a few
- 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. For your information, we have chosen to offer this property on a mortgaged basis, because doing so increases the forecast 5-year total return from 32% to 44% and increases the annual yield by 0.22% p.a
Investors will start accruing dividend income from the day they commit to investing in the property. Contracts are due to exchange in the next few days with completion scheduled 5 weeks later. The resale market for this investment will launch the following business day after completion.
Our investment comprises 6 flats (4 one-bedroom flats and 2 two-bedroom flats). 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 £609,000 for these properties versus a Chartered Surveyors Valuation of the units if sold separately of £680,000. By purchasing these flats 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 6 flats is £42,240 per annum. The number of vacant flats 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 6.10% and the forecast Dividend Yield 3.60% (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 is provided by a major high street bank with a 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 are being acquired in good condition, and the Chartered Surveyor's report identifies no material issues. We have set aside a contingency of £2,550 for any issues that are identified after purchase. There is also a total provision of £9,000 for furnishings.
The block is being acquired on a high-quality Leasehold basis with 150 years remaining and a ground rent of £1,000 per annum, fixed for the entire duration of the lease.
This transaction was approved by our RICS qualified Director of Property.
The investment comprises 6 flats - 4 one-bedroom flats and 2 two-bedroom flats.
We present here floorplans for 2 of the flats as examples.
- Share Valuation
- House Price Index
- Rental Income Breakdown
- Funding Target
- Share Valuation
- Purchase Price
- Purchase Costs
- Stamp Duty
- Legal & Prof Fees
- Pre-let expenses
- Repairs Provision
- Mortgage Arrangement Fees
- - £307,545
- Funding Target
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
- - £5,080
- Gross Rental Revenue
- = £37,160
- Gross Rental Yield
- - £24,411
- Annual Interest Payment
- Letting and Management
- Property Insurance
- Allowance for possible voids
- Maintenance Allowance
- Corporation Tax
- Dividends per year
- = £12,749
- 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.
Queen Street, Sheffield, S1 1WF,