Investors paid 49.43p per share in the New Listing for this property, and it became available on the Resale market August 16th 2017. Based on this share price, and third party forecasts for the region, the estimated total return is 44% 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 49.19p per share to achieve these same returns.
By agreeing to buy nine flats in a single transaction, we’ve secured a 9.6% discount to the price of the individual flats. The exit strategy for this investment will be to sell the units individually to realise the full discount for investors.
Barton Court is a converted Grade II listed Victorian Railway Warehouse, finished to a high standard. The property is a three-minute walk from Warrington Central railway station, providing direct services to the Northern Powerhouses of Liverpool and Manchester in under half an hour. Warrington itself is home to major employment clusters including the Birchwood Business Park which employs c.6,000 staff, and the ongoing £1bn Omega development, currently the largest mixed-use development site in the North West. This property has a strong dividend yield, and should benefit from sustained demand in the coming years.
View a short video from our Director of Property to learn more.
- The investment comprises 9 flats in Barton Court, Warrington. We have purchased the properties at a 9.6% discount by buying in bulk. The discount more than covers the purchase costs of 8.7% (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, thereby realising the discount that we have secured from buying in bulk. Being 9 flats within a larger development 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 the North West of 12%, 10.4%, 18.1% and 10.9% respectively, over the next 5 years. The average of these predictions is 12.9% and once geared by the mortgage debt would deliver 5-year capital growth of 22.6%, based on selling the units individually. Once a dividend yield is added, this would equate to a total return of 44% over a 5-year period based on the New Listing price of 49.43p 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 property 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 49.19p per share to achieve these same returns
- The town is currently undergoing substantial regeneration, which has catalysed £750m of investment and substantial job growth in the area. This includes a £107m redevelopment of the town centre, and £190m regeneration of Warrington’s central transport hub. These projects are expected to complete in 2019 and 2024 respectively
- 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 9 flats (5 two-bedroom duplex flats, 1 two-bedroom flat and 3 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 £850,000 for these properties versus a Chartered Surveyors Valuation of the units if sold separately of £940,000. 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 9 units is £65,340 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 6.68% and the forecast Dividend Yield 4.22% (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 £22,000 for any issues that are identified after purchase. There is also a total provision of £4,000 for furnishings.
The flats were acquired on a high-quality leasehold basis (each with 987 years remaining and a ground rent of £134 per annum linked to RPI).
This transaction was approved by our RICS qualified Director of Property.
The investment comprises 9 flats (5 two-bedroom duplex flats, 1 two-bedroom flat and 3 one-bedroom flat) within a converted Grade II listed building.
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
- - £429,250
- 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
- - £8,526
- Gross Rental Revenue
- = £56,814
- Gross Rental Yield
- - £35,458
- Annual Interest Payment
- Letting and Management
- Property Insurance
- Allowance for possible voids
- Maintenance Allowance
- Corporation Tax
- Dividends per year
- = £21,356
- 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.
9 flats in Barton Court, WA2 7TE,