bfish
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Post by bfish on Oct 6, 2017 12:52:02 GMT
I wonder how 'Dutch Quarter I' (a 9 unit block) has increased in value, while 'Dutch Quarter II' (a 5 unit block) has dropped . . . ?
Any ideas?
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SteveT
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Post by SteveT on Oct 6, 2017 13:11:14 GMT
I wonder how 'Dutch Quarter I' (a 9 unit block) has increased in value, while 'Dutch Quarter II' (a 5 unit block) has dropped . . . ? Any ideas? Is there an obvious way on PP to view the previous and new valuations across the property book (other than by creating and maintaining an offline record)? Edit: Ah, now found the little link in the Blog post to a spreadsheet!
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Post by peerlessperil on Oct 6, 2017 13:14:06 GMT
I wonder how 'Dutch Quarter I' (a 9 unit block) has increased in value, while 'Dutch Quarter II' (a 5 unit block) has dropped . . . ? Any ideas? The underlying surveyor valuations of the properties in both cases are unchanged (Sept valuation vs May valuation), so I'm a little confused by the comment above. The valuation of the SPV that holds the properties will have changed, but that is down to the amortisation of the acquisition costs feeding through. The stamp duty and legal costs get spread over 5 years. However, they should move in tandem. The share prices themselves move around according to supply & demand in the secondary market - irrespective of the above. Over the last couple of days the offer price in each case has gone up by 1p, from 94 to 95 and from 61 to 62..... The bid/offer of the 9 unit block is unusually wide at the moment (92/95), so if you are using bid valuations rather than offer you could get some strange results......
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Post by peerlessperil on Oct 6, 2017 13:25:52 GMT
I wonder how 'Dutch Quarter I' (a 9 unit block) has increased in value, while 'Dutch Quarter II' (a 5 unit block) has dropped . . . ? Any ideas? Is there an obvious way on PP to view the previous and new valuations across the property book (other than by creating and maintaining an offline record)? Not immediately that I am aware of, and even if you have the skills to scrape the underlying html the previous property value gets overwritten (although the original purchase price is in there). The valuation attachment is cumulative, so you can review all previous valuations if you scroll through. The monthly "open house" data attachment (in the blog section) gives you the full monthly SPV/divi/property valuation histories for each property, but generally doesn't get published till mid month. I keep my own offline record quarterly, using google docs IMPORTXML to import the key financials. Can't complain though, from a data & transparency perspective Property Partner are miles ahead of any other platform I use.
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bfish
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Post by bfish on Oct 7, 2017 6:00:44 GMT
The underlying surveyor valuations of the properties in both cases are unchanged (Sept valuation vs May valuation), so I'm a little confused by the comment above. As I have a £1k in both properties, the 'current investments' tab shows 'D Q I' has gone up £37.29, while 'D Q II' has dropped £8.01 - a small difference, I appreciate... If perchance an ACTUAL visit has been made, maybe 1 or 2 flats have been better maintained, or are more easily accessible perhaps ? If curiosity persists, will have to ask PP Monday !
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Post by peerlessperil on Oct 7, 2017 8:00:47 GMT
Property Partner is a surprisingly (and in my view, admirably) complex beast. Investors need to appreciate that there effectively 3 valuations for each property SPV: - The valuation of the underlying property (updated by desk valuations every quarter)
- The accounting valuation of the SPV company that wraps the property. If there is a mortgage it will be very different to the property valuation. This also includes items like amortising purchase costs and the deferred tax that will eventually need to be paid one day if the property is ever sold at a capital profit. This valuation will move even if the property valuation in 1) above remains constant.
- The "market" value of the SPV, as determined in the secondary market by bid/offer pricing. This reflects many things - the supply & demand for shares as people look to enter & exit, as well as people taking a view on where the property price might be headed.
The valuation you see in the Current Investments tab is the second of the 3 above.
The valuation will therefore diminish as the amortised purchase costs number trends down to zero over 5 years (so that every investor involved over the 5 year term pays their fair share of the stamp duty etc), and the deferred tax number will also vary as the property valuation moves or corporate tax rates change. In the case of the 2 Dutch Quarter investments I can't see any reason why the SPV valuations would have moved in opposite directions. For the 9 unit the amortised costs declined by £5,691 and for the 6 unit they declined by £3,344. These fed through to both valuations and were the only accounting valuation changes I can observe between yesterday and about a week previously. In my view the valuation for both companies dropped very slightly due to amortising costs over the past week. The question is therefore what period Property Partner are referring to when they display a change in SPV valuation - it may be quarterly back to the July valuations, in which case you have 3 months worth of cost amortisiation to look into.... |
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bfish
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Post by bfish on Oct 7, 2017 8:47:49 GMT
Property Partner is a surprisingly (and in my view, admirably) complex beast. Investors need to appreciate that there effectively 3 valuations for each property SPV: - The valuation of the underlying property (updated by desk valuations every quarter)
- The accounting valuation of the SPV company that wraps the property. If there is a mortgage it will be very different to the property valuation. This also includes items like amortising purchase costs and the deferred tax that will eventually need to be paid one day if the property is ever sold at a capital profit. This valuation will move even if the property valuation in 1) above remains constant.
- The "market" value of the SPV, as determined in the secondary market by bid/offer pricing. This reflects many things - the supply & demand for shares as people look to enter & exit, as well as people taking a view on where the property price might be headed.
The valuation you see in the Current Investments tab is the second of the 3 above.
The valuation will therefore diminish as the amortised purchase costs number trends down to zero over 5 years (so that every investor involved over the 5 year term pays their fair share of the stamp duty etc), and the deferred tax number will also vary as the property valuation moves or corporate tax rates change. In the case of the 2 Dutch Quarter investments I can't see any reason why the SPV valuations would have moved in opposite directions. For the 9 unit the amortised costs declined by £5,691 and for the 6 unit they declined by £3,344. These fed through to both valuations and were the only accounting valuation changes I can observe between yesterday and about a week previously. In my view the valuation for both companies dropped very slightly due to amortising costs over the past week. The question is therefore what period Property Partner are referring to when they display a change in SPV valuation - it may be quarterly back to the July valuations, in which case you have 3 months worth of cost amortisiation to look into.... Phew . . . ! Are you their Acountant by any chance ? 🤓
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Post by peerlessperil on Oct 7, 2017 18:16:54 GMT
Phew . . . ! Are you their Acountant by any chance ? 🤓 Not at all affiliated, with either the platform or the profession you will be relieved to hear. I have recently spent some time looking at how Property Partner works, and I am pleasantly surprised at how much thought has clearly been put into the platform's development (not a sentiment you will find me expressing elsewhere on the forum so far). They've kept things accessible without ducking the technicalities and that is no mean feat. My preferred metric for property has always been £/sq ft. Deriving the formula to calculate the share price implied £/sq ft for each property had my small brain entertained for longer than I care to admit, as the deferred tax is also a function of the property price when there is a capital gain (but not a loss). I am a little suspicious of the discounts claimed when buying multiple units (the developer got the list price wrong or he would have sold them off-plan), and some of the valuations seem a little optimistic, but minor reservations really.
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bigfoot12
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Post by bigfoot12 on Oct 29, 2017 14:49:02 GMT
I have recently spent some time looking at how Property Partner works, and I am pleasantly surprised at how much thought has clearly been put into the platform's development (not a sentiment you will find me expressing elsewhere on the forum so far). They've kept things accessible without ducking the technicalities and that is no mean feat. Have you managed to work out how much Property partner are making in fees in addition to the 2% up front charge either up front or on going? I have struggled to work this out, but given some of the recent offers of cashback and guaranteed income they have offered I am concerned that it is higher than I first thought. The charge the vendor 2.5% + VAT and they charge a 10.5% +VAT ongoing letting and management fee from the rent, which seems a little high, but not outrageous. Any other fees? [Happy to move to a new thread if needed.]
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bigfoot12
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Post by bigfoot12 on Oct 31, 2017 7:58:15 GMT
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Post by sayyestocress on Oct 31, 2017 9:30:21 GMT
IIRC somewhere on their website or within one of their e-mails they said they were spending some of their marketing budget on one/some of the cashback offers. They could also be making a loss in an attempt to chase growth. The value of properties of the platform has certainly grown over the recent months what with the summer flurry of weekly 5% for two year properties plus the two big student accommodation blocks and pretty much an entire street of houses in Newcastle! The amount of money they seem to be able to raise is impressive when you consider how PM struggle to fund all seven flats they bought in the Bootle development (which I am also invested in).
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ding
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Post by ding on Oct 31, 2017 9:33:07 GMT
I have recently spent some time looking at how Property Partner works, and I am pleasantly surprised at how much thought has clearly been put into the platform's development (not a sentiment you will find me expressing elsewhere on the forum so far). They've kept things accessible without ducking the technicalities and that is no mean feat. Have you managed to work out how much Property partner are making in fees in addition to the 2% up front charge either up front or on going? I have struggled to work this out, but given some of the recent offers of cashback and guaranteed income they have offered I am concerned that it is higher than I first thought. The charge the vendor 2.5% + VAT and they charge a 10.5% +VAT ongoing letting and management fee from the rent, which seems a little high, but not outrageous. Any other fees? [Happy to move to a new thread if needed.] You can see PP accounts at companies House. Year to Dec 2016 was a loss of 7.2 million. Previously I thought WiseAlpha 1% fees were high. But just consider the staff costs and how much income you need to cover that. These types of business really need to scale up to be viable.
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Post by peerlessperil on Oct 31, 2017 10:56:07 GMT
Have you managed to work out how much Property partner are making in fees in addition to the 2% up front charge either up front or on going? I have struggled to work this out, but given some of the recent offers of cashback and guaranteed income they have offered I am concerned that it is higher than I first thought. The charge the vendor 2.5% + VAT and they charge a 10.5% +VAT ongoing letting and management fee from the rent, which seems a little high, but not outrageous. Any other fees? [Happy to move to a new thread if needed.] Not my primary concern, to be honest - the accounts show a loss and they cut their headcount by c. 30% last summer so I doubt there are too many sports cars in the parking lot yet. The website has clearly required a lot of investment. Yes, I am aware they take a cut from vendors as well as investors, and it reinforces my prior view that new build & developers' list prices are to be viewed with extreme caution. Property Partner will be outsourcing most of the property management and taking a cut, but the management fee isn't out of kilter with industry norms. I would be more concerned if they weren't charging a reasonable level of fees as a platform failure could be pretty messy. I compare the tax situation & their costs vs. my own as a direct landlord. There are pros & cons: Pros: - Diversification - geographic and numeric
- Liquidity
- Convenience
- Variable leverage (you can mix & match your portfolio to vary the leverage level)
- You can benefit from commercial stamp duty rates on some SPVs
- Corp tax rates lower than income tax rates, £5k divi allowance
- You can put low bids into the secondary market and sit back until someone in need of liquidity hits your bid
- Arbitrage opportunities where SPV price indicates a discount to valuation
Cons: - Risk of platform failure - property is a long-term game with high up-front costs, and if the platform fails in the short-term then it won't be pretty.
- Tax treatment is not as favourable for some. You can't duck the corporation tax on a gain at sale, whereas you can use your personal CGT allowance for a BTL. Similarly, corp tax is paid on rent within the SPV which you can't recover or offset (gift aid, VCT, EIS etc), and once divis exceed £5k income tax kicks in again.
- No control over when dividends are paid
- Stamp duty on share transactions in secondary market
- Round number share prices mean bid/offer spreads are very wide for lower value properties, and the bid/offer spreads are wider for geared properties than identical ungeared. Helps the "liquidity providers" I guess, at the expense of forced sellers in the smaller deals who have to cross the bid/offer spread.
- Costs are higher than for properties I manage myself
- Not entirely transparent - lack of information on voids, tenant issues etc.
- Are the provisions sufficient?
- How well are the properties maintained & what level of depreciation is to be expected?
- The valuations look a little optimistic (not surprising if vendor has paid PP 2.5% up front)
- Concerns over whether the valuing surveyor is from the same agent that gets the management contract...
- The 5yr unwind is untested, as is fellow investor behaviour - could we be forced to liquidate at a loss if the 5yr point corresponds with a market downturn?
- Poor due diligence on my part - I very much suspect I wouldn't be holding some of the properties I hold if I'd actually visited them and was very familiar with their neighbourhoods (I accept lower quality as a price to be paid for diversification).
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IFISAcava
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Post by IFISAcava on Oct 31, 2017 11:50:24 GMT
Have you managed to work out how much Property partner are making in fees in addition to the 2% up front charge either up front or on going? I have struggled to work this out, but given some of the recent offers of cashback and guaranteed income they have offered I am concerned that it is higher than I first thought. The charge the vendor 2.5% + VAT and they charge a 10.5% +VAT ongoing letting and management fee from the rent, which seems a little high, but not outrageous. Any other fees? [Happy to move to a new thread if needed.] Not my primary concern, to be honest - the accounts show a loss and they cut their headcount by c. 30% last summer so I doubt there are too many sports cars in the parking lot yet. The website has clearly required a lot of investment. Yes, I am aware they take a cut from vendors as well as investors, and it reinforces my prior view that new build & developers' list prices are to be viewed with extreme caution. Property Partner will be outsourcing most of the property management and taking a cut, but the management fee isn't out of kilter with industry norms. I would be more concerned if they weren't charging a reasonable level of fees as a platform failure could be pretty messy. I compare the tax situation & their costs vs. my own as a direct landlord. There are pros & cons: Pros: - Diversification - geographic and numeric
- Liquidity
- Convenience
- Variable leverage (you can mix & match your portfolio to vary the leverage level)
- You avoid 2nd property additional stamp duty
- Corp tax rates lower than income tax rates, £5k divi allowance
- You can put low bids into the secondary market and sit back until someone in need of liquidity hits your bid
- Arbitrage opportunities where SPV price indicates a discount to valuation
Cons: - Risk of platform failure - property is a long-term game with high up-front costs, and if the platform fails in the short-term then it won't be pretty.
- Tax treatment is not as favourable for some. You can't duck the corporation tax on a gain at sale, whereas you can use your personal CGT allowance for a BTL. Similarly, corp tax is paid on rent within the SPV which you can't recover or offset (gift aid, VCT, EIS etc), and once divis exceed £5k income tax kicks in again.
- No control over when dividends are paid
- Stamp duty on share transactions in secondary market
- Costs are higher than for properties I manage myself
- Not entirely transparent - lack of information on voids, tenant issues etc.
- Are the provisions sufficient?
- How well are the properties maintained & what level of depreciation is to be expected?
- The valuations look a little optimistic (not surprising if vendor has paid PP 2.5% up front)
- Concerns over whether the valuing surveyor is from the same agent that gets the management contract...
- The 5yr unwind is untested, as is fellow investor behaviour - could we be forced to liquidate at a loss if the 5yr point corresponds with a market downturn?
- Poor due diligence on my part - I very much suspect I wouldn't be holding some of the properties I hold if I'd actually visited them and was very familiar with their neighbourhoods (I accept lower quality as a price to be paid for diversification).
Excellent post - thanks! I would add no selling costs (on SM at least) is a bonus of PP Vs direct owning, where there would be agent's fees and legal fees (+VAT) on any disposal.
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Post by peerlessperil on Oct 31, 2017 12:07:12 GMT
Excellent post - thanks! I would add no selling costs (on SM at least) is a bonus of PP Vs direct owning, where there would be agent's fees and legal fees (+VAT) on any disposal. I guess the selling costs depend on how quickly you need to get the money out - if you can afford to put an offer out there and wait for a buyer then no problem, but if you have to cross the bid/offer spread for immediate liquidation then that can be very expensive. If you are invested at the 5yr point you could end up bearing the usual selling costs (and you need a 5yr+ investment horizon for resi at these yields). One point I forgot to make - the bid/offer spread can be horrific for some of the smaller properties (will edit post above). If the share price is low (for example the Plumstead properties trading at 17p/18p) then the bid/offer is nearly 6%! They really should stop rounding to the nearest penny as it discriminates against the smaller deals (although I suspect the "liquidity providers" are very fond indeed of this quirk). It also leads to the slight perverse situation whereby mortgaged properties with a lower SPV value end up with a wider bid/offer spread than an identical property that isn't geared....
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