Investors paid 71.18p per share in the New Listing for this property, and it became available on the Resale market September 25th 2017. Based on this share price, third party forecasts for the region and the prudent assumption that we realise less than half the discount on exit, given the number of units involved, we arrive at an estimated total return of 40% over the next 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 70.83p per share to achieve these same returns.
Heritage Court is a modern development of attractive flats located in Dinnington, a South Yorkshire town situated near Sheffield. The property has the benefit of excellent local road connections, with close links to the M1, M18, and A1 – providing easy access to Sheffield in 40 minutes, and Leeds in an hour. This makes Heritage Court ideal for commuting professionals to two Northern Powerhouse hubs, with all the benefits of a more rural setting.
View a short video from our Director of Property to learn more.
- The investment comprises 14 out of 26 flats in Heritage Court, Dinnington. We purchased the properties at a 14.9% discount by buying in bulk. The discount more than covers the purchase costs of 6.0% (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 flats individually rather than as a single investment. Whilst we've secured a 14.9% discount on these properties, as verified by the RICS surveyor, we believe that selling all 14 flats would take some time in this particular local market. We are therefore more conservatively assuming investors would, on average, only realise 7% of this discount on any potential exit
- Leading research agencies Savills, Knight Frank, JLL and CBRE, have predicted house price growth in Yorkshire and The Humber region 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 21%, based on selling the flats at our conservative assumption. Once the dividend yield is added, this would equate to a total return of 40% over a 5-year period based on the New Listing price of 71.18p 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 flats 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 70.83p per share to achieve these same returns
- The Sheffield City Region, which incorporates the borough of Rotherham, has a £30bn economy with major employers including PwC, 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
Our investment comprises 14 flats (10 two-bedroom flats and 4 one-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 £1,260,000 for these properties versus a Chartered Surveyors Valuation of the units if sold separately of £1,480,000. By purchasing these properties 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 14 units is £90,300 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 6.11% and the forecast Dividend Yield 3.70% (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 were acquired in good condition, and the Chartered Surveyor's report identifies no material issues. We have set aside a contingency of £15,000 for any issues that are identified after purchase. There is also a total provision of £7,000 for furnishings.
The flats were acquired on a high-quality leasehold basis (each with 142 years remaining and a ground rent of £150 per annum linked to RPI).
This transaction was approved by our RICS qualified Director of Property.
The investment comprises 14 flats (10 two-bedroom flats and 4 one-bedroom flats) within a development of 26 flats.
We present here floorplans for 3 of the flats as examples.
- Share Valuation
- House Price Index
- Rental Income Breakdown
- Latest Valuation
- Latest Share Valuation
- Latest Property Value
- Amortised Purchase Costs
- - £636,300
- 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
- - £13,300
- Gross Rental Revenue
- = £77,000
- Gross Rental Yield
- - £50,039
- Annual Interest Payment
- Letting and Management
- Property Insurance
- Allowance for possible voids
- Maintenance Allowance
- Corporation Tax
- Dividends per year
- = £26,961
- 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.
14 flats in Heritage Court, S25 3SA,