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Post by alexb26 on Oct 12, 2016 22:02:48 GMT
I note that PP have shifted direction recently towards acquiring blocks of flats - with their investment case being that being a cash buyer/buying in bulk secures them a discount. Ok, fine - but are we to understand that these with then be sold off individually to achieve their full break-up value? If so, it would make more sense for quarterly valuations to be based on the break price rather than bulk price (which I would like, since it would make it easier to sell my shares for what I believe they're worth)? Am concerned that such a sale could be slow, costly and not in PP's interest to deliver max return.
If not, then it would seem that there is no 'discount reflected in the current pricing' -- which given PP's employment of property experts and looking at PM's ability to buy properties way below market value, these deals don't look that specials. I'm no sage when it comes to property but understand that money is made in the purchasing.
Nice if someone could clear up!
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beh
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Post by beh on Oct 13, 2016 9:56:49 GMT
Had similar thoughts, particularly for the blocks of ~10 units. How likely is it they'll end up on the open market in 5 years? Does it acknowledge that it's unlikely they'd sell them individually? Although as you say, then it wouldn't be a discount.
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Neil_P2PBlog
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Post by Neil_P2PBlog on Oct 13, 2016 10:07:06 GMT
Also related to resale are the fees. To compare, PM have a 15% profit share fee of the raise in value on sale. However PP have no selling/profit share related fees (https://propertypartner.co/howitworks/faqs#faqs-feesandtaxes), just buying and ongoing maintenance fees. So with this structure there is no profit incentive for them to sell at the higher breakup prices.
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beh
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Post by beh on Oct 13, 2016 10:38:56 GMT
So with this structure there is no profit incentive for them to sell at the higher breakup prices. Aye, somewhat depends how much faith you have in "Property Partner will administer this process and is obliged to act in the interests of investors to maximise financial return". Not sure PM having that incentive is vastly better, or at least can't see it being that profitable/worthwhile for them given I thought they were more focused on yield. On the average property how much is 15% of the raise in value likely to be? Also thinking along the lines of the freakonomics bit on estate agents, there's perhaps surprisingly little incentive for them to hold out for a better price. The biggest incentive for both is probably gaining a good reputation for the platform.
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nrw
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Post by nrw on Oct 14, 2016 11:23:56 GMT
Had similar thoughts, particularly for the blocks of ~10 units. How likely is it they'll end up on the open market in 5 years? Does it acknowledge that it's unlikely they'd sell them individually? Although as you say, then it wouldn't be a discount. Provided there is sufficient liquidity on the secondary market for investors to exit investments when they choose, then it's not in anyone's interests for PP to sell properties - they should retain them in perpetuity as the transaction costs (stamp etc.) are only paid once on the primary market. Selling properties whilst buying new ones therefore doesn't make any sense - it only makes sense where the portfolio is being wound down for whatever reason.
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beh
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Post by beh on Oct 14, 2016 12:30:33 GMT
I feel perhaps some properties will need to reach the open market to test their valuations as there's often quite a gap between them and the lowest share price available currently. Otherwise I'm not convinced the liquidity would be there for the first few. I guess this also depends on how many choose to exit relative to the size of the platform in ~5 years time.
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littonowl
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Post by littonowl on Oct 19, 2016 11:10:50 GMT
I note that PP have shifted direction recently towards acquiring blocks of flats - with their investment case being that being a cash buyer/buying in bulk secures them a discount. Ok, fine - but are we to understand that these with then be sold off individually to achieve their full break-up value? If so, it would make more sense for quarterly valuations to be based on the break price rather than bulk price (which I would like, since it would make it easier to sell my shares for what I believe they're worth)? Am concerned that such a sale could be slow, costly and not in PP's interest to deliver max return. If not, then it would seem that there is no 'discount reflected in the current pricing' -- which given PP's employment of property experts and looking at PM's ability to buy properties way below market value, these deals don't look that specials. I'm no sage when it comes to property but understand that money is made in the purchasing. Nice if someone could clear up! Would be really good if a Rep of Property Partner (if there is one on this site?) could address the OP's question...
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Neil_P2PBlog
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Post by Neil_P2PBlog on Oct 19, 2016 13:54:30 GMT
It's a little hard to believe the most recent offering:
Yorkshire based property, postcode Y012.
From PP:
Purchase Price: £1.28m
'Market Breakup Price': £2m
Discount: 36%
Gross Rent forecast: £78k
Gross Rental Yield on Market Value: 3.9%
My rough estimate:
Expected Rental Yield from rentalyield.co.uk for same postcode: 6.63% (1bed) - 4.49% (3bed)
4.49% yield values it at £1.73m
6.63% yield values it at £1.18m
If it really was worth £2m, wouldn't the original owner have tried to sell off individually themselves? If they found it too much effort to do so, why would PP do any better?
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invester
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Post by invester on Jan 18, 2017 13:49:10 GMT
I must admit I share these concerns.
The latest offering is the block of flats in Nottingham.
For this 4.04% yield claimed we are needing £52,800 in rental income per year.
I just can't see how this would work out. The 1-bed flat, no more than £800pcm, and even that is questionable because it's nothing special and there are plenty of other options in the postcode.
That leaves us chasing £1,800 per month for the 2 x 3 bed apartments. I can't really see that ever being achieved, student flats go for about this amount but then these aren't paying the rent 12 months of the year.
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