shimself
Member of DD Central
Posts: 2,561
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Post by shimself on Mar 6, 2018 10:07:50 GMT
I think the valuations are more intended to offer false comfort to investors. Dashboard valuation 326 press Sell and it suggests instead 282. I think I'm going to swallow the bitter pill and leave, I hate being diddled What makes you think that you are being diddled? As hazellend says there is a price to exit now, which is lower than someone has valued the properties in many cases. This is no different to Investment Trusts which mainly trade (on a secondary market) at a discount to NAV (the fair valuation), except that PP SPVs are much smaller and less liquid and so the swings are greater. Most of the properties that have a high discount to valuation have been on the platform for a while and have a very low yield. I think a couple are very large (at the time it was thought that by buying 15 properties it might be possible to avoid the second home stamp duty), some will have invested hoping to diversify later. The site as a whole is overweight London property with 2% yields, it isn't surprising to me that these are offered for sale at steeper discounts. My portfolio (not just PP) is overweight London and so I won't be buying any of these, even at a 30% discount. I have just made a purchase (tiny - dividend money lying around my account), but rather than buy Hastings with a 15% discount and a 3.4% yield, I went for Hove with a 3.8% yield and an 8% discount. Hmm. The best most accurate valuation is what somebody is prepared to pay for it. In PP's case we actually have that figure live and on the site. This quarterly valuation (which must surely be a 5 minute exercise, based on old valuation +/- some area indexation figure, I can't see where it's explained) is meaningless isn't it, I can hardly see the point of it.
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Post by peerlessperil on Mar 6, 2018 10:15:28 GMT
I think the valuations are more intended to offer false comfort to investors. Dashboard valuation 326 press Sell and it suggests instead 282. I think I'm going to swallow the bitter pill and leave, I hate being diddled Property valuations are by their very nature are "backward looking". Hard comparative evidence is transaction pricing from the Land Registry, not asking prices on Rightmove which reflect the tendency for agents to inflate valuations to win the mandate, plus the perennial seller optimism. As transaction pricing is only published long after an offer is accepted there is a structural lag, so in a falling market valuations will err on the high side, despite honest intentions all round. On property partner you then have three further factors that come into play: - The bid/offer on the traded shares of the SPVs. These can be very wide for smaller SPVs. There is a perverse situation on PP whereby the bid/offer spread on an SPV containing a mortgaged property can be double what it would be on an SPV containing the same property but with no mortgage. This is because you can only trade in round pennies, and a mortgage halves the NAV (& thus the share price) of the SPV. Even so, you can't expect liquidity in the shares of a small property SPV without paying a price somewhere.
- If property prices remain static, the SPV will still decline in value going forward. This is because SPV shareholders you don't pay the stamp duty/acquisition costs on the property acquisition up-front. Instead the stamp duty/acquisition costs are amortised over 5 years so that all shareholders over that 5 year period share the burden equally over their respective holding periods. This is quite clever, but I suspect not fully appreciated by many investors on the platform.
- Not relevant to this specific discussion as NAV incorproates it, but leveraged properties (assuming 50% LTV) will double your losses when the property value drops. For every £1 the property drops in price the NAV will decline by £2 (simplistic). Buy-to-let investors aren't forced to to mark-to-market in this way, but it is the reality.
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