As a company we deal with all aspects of property investment, but the trend for our clients right now, and over the last 6 months has not been leveraging (maybe to do with economic uncertainties such as Interest rates or Brexit) but to put the same amount of deposit into a cash investment with no debts attached to it.
This offers all the key criteria of a solid investment, namely:
High Net returns.
Fully managed so no upkeep, tenant sourcing, management or day to day issues.
Proven and documented demand outstripping supply.
Excellent resale and exit options if required.
We, of course, still have a great selection of leverageable options and would not deter anyone from this method with some very exciting upcoming launches, but this email is designed to highlight why cash investments work for some and dispel some myths.When talking cash investments we are mainly talking about PBSA (Purpose Built Student Accommodation), the main fact is simple – the student population is growing at about 6% per year and there is not enough accommodation to cater for them near the Universities they want to be, whichmeans they have to live further away, which increases their costs and ultimately affects their education. This fact is undisputed and information iseasily accessible on the internet – just search “student accommodation shortage” so this is your DEMAND, and this is one of the key areas of any investment, and demand in certain locations will take an eternity to satisfy.
One area we are very keen to focus on is Newcastle Under Lyme near Stoke On Trent which house 3 Universities but has two very strong plus factors you have to focus on. Firstly the fact that the University campus accommodation at Keele university can only hold 3,000 students, yet theirforecast is to have 12,000 and this is just the one University, this is not taking into account Staffs University and then you have the Royal Stoke Medical University so you have a critical demand for accommodation to attract students. Secondly and more importantly is that there are very few other options, the town is small and does not have the private housing sector to fall back on, places like Manchester and Liverpool have large catchment areas that can offer students choice, hence depleting the number of students looking for YOUR bed, this is not an issue in this area, students do not have the choice here so demand will always be high, please see the link below:
As for returns, who can complain at 10% Net after all deductions and with no risk of void periods for 5 years – if you offered that on any other property your hand would be bit off – so after all service charges are deducted, all tenant sourcing and admin, all upkeep and maintenance and fully furnished, you are also currently exempt from Stamp Duty.Then it comes to the ease of resale and how it would work, it really is not as hard as you think or may have been led to believe, the one downside is you cannot “release” funds from the property, this is true but if you needed to exit then your options are limitless and in brief this is how it works:
You pay £65,000
Over 5 years you are guaranteed £32,500
Your costs are £1,750 for 5 years ground rent
Net return £30,750
You want to sell in 5 years:
The rent for the student which includes everything and all bills is £150 per week over 51 weeks – total £7,650 per annum.
*Service charges which includes all management, letting, upkeep and utilities is £1,350 per year.
Rents increase by an average of 3.5% per year
This means the rent will be £178 per week = £9,078 per annum
Minus the £1,350 equates to a £7,728 net return and based on your purchase price is a 11.88% Net return.
*Service charges may also increase in line with inflation but this is a minimal amount over 5 yearsIf you sold your property offering it on the market with the following returns, this is how much your property would be worth:
8% Net return = £96,000 and a £31k profit
9% Net return = £86,000 and a £21k profit
10% Net return = £78,000 and a £13k profit
So offering your property on the market at £78,000 in 5 years with a “REAL” 10% NET return is highly desirable and not hard to see how it would be attractive.
Based on this it means you would have achieved a CASH return in 5 years of £43,750 or a 67% return on your money, and this is why we see this as such a good investment plan.
Any questions please call on 01244 343 355 or email firstname.lastname@example.org