bigfoot12
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Post by bigfoot12 on Oct 31, 2017 15:49:47 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
- 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).
Great reply, but perhaps my question wasn't very clear. I want PP to make money as I would like them to survive and grow, but I want to understand better what charges I am paying which I don't fully at the moment (but PP are doing better than many other sites). I don't think that you are correct on the stamp duty point as most of the SPVs own more than one property it will have paid them.
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Post by peerlessperil on Oct 31, 2017 20:06:41 GMT
I don't think that you are correct on the stamp duty point as most of the SPVs own more than one property it will have paid them. Funnily enough it is the other way around. The single property SPVs do get hit with the additional 3%. However, once you buy 6 or more properties commercial rates of stamp duty can apply, and they are lower than residential rates. This is all a bit beyond the intended scope of my original reply (I'll edit for clarity), but the Property Partner FAQs go into some detail on this topic if you look in the Glossary bit at the bottom of the FAQs (off the bottom of many people's screens so often missed) and look under "Stamp Duty Land Tax".
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beh
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Post by beh on Apr 11, 2018 19:25:03 GMT
At a glance seems I took a bit of a hit overall for the first time on the current valuations.
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bigfoot12
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Post by bigfoot12 on Apr 12, 2018 7:30:06 GMT
At a glance seems I took a bit of a hit overall for the first time on the current valuations. Same here down about 1.2% for the quarter (not annualised). Equates to about 4 months rental income for me. I haven't looked to see if there is a regional, or other story within this.
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Post by sayyestocress on Apr 12, 2018 7:55:47 GMT
At a glance seems I took a bit of a hit overall for the first time on the current valuations. Same here down about 1.2% for the quarter (not annualised). Equates to about 4 months rental income for me. I haven't looked to see if there is a regional, or other story within this. The revaluation blog post breaks performance down into London and rest of UK: resources.propertypartner.co/revaluation-property-performance-in-q1-2018/Personally I've "lost" about two thirds of any paper capital gains since I started investing in late 2016 or roughly 1.5 times my last rental dividend. I'm not really bothered until they come up for the 5 year renewal / sale. There's going to be plenty of political shenanigans that may affect house prices between now and 2020 when the earliest properties are due to come to the end of their 5 year term.
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SteveT
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Post by SteveT on Apr 12, 2018 9:14:51 GMT
I queried the paper losses (ie. negative "latest valuation gains") on a couple of the Q3/Q4 2017 properties, such as the Chester one, where the property value apparently is unchanged (despite a claimed bulk-purchase discount to market value on acquisition) but the "latest share valuation" has dropped. Apparently the root cause is that:
a) the first few months' worth of "amortised purchase costs" are only deducted from the "latest investment value" at the first quarterly revaluation point, so at least 3 months' worth but sometimes as much as 5-6 months' worth if the purchase date fell just after a quarterly revaluation point, and
b) even where the exit strategy is to sell flats individually, any discount negotiated at purchase no longer enhances the "latest investment value" that the "latest share valuation" is calculated from (a policy that changed in mid-late 2016 apparently). Separately, a "latest vacant possession value / break-up price" is also shown for information, but this isn't reflected in the ongoing share value.
"There are properties purchased in 2015 and 2016 where we realised the purchase discount to vacant possession at the first revaluation, where the disposal strategy is to break up the investment and sell units individually, which we felt was appropriate during the market conditions at that time. In the wake of the EU Referendum and resulting change in property market conditions and investor sentiment, we decided to hold all new residential properties at their investment value, which reflects a discount to the individual unit vacant possession value. Our Director of Property has considered every residential investment block to determine which method of sale will deliver the optimum return for investors. Residential properties acquired from September 2016 onwards, which we intend to break up and sell as individual units, stand to benefit from the discount we achieved at purchase at the point that they are sold."
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