Northcote Property Portfolio Consultancy Introduction The information in this document is for private circulation and is believed to be correct but cannot be guaranteed. Opinions, interpretations and conclusions represent our judgement as of this date and are subject to change. The Company and its related Companies, directors, employees and clients may have position or engage in transactions in any of the products mentioned. Past performance is not necessarily a guide to future performance. The value of shares, and the income derived from them, may fall as well as rise. The information contained in this publication does not constitute a personal recommendation and the investment or investment services referred to may not be suitable for all investors; therefore we strongly recommend you consult a representative of Northcote Property Investment Services Limited before taking any action. All references to taxation are based on current levels and practices which may be subject to change. The value of any tax benefits will be dependent on individual circumstances. Northcote Property Portfolio Consultancy Introduction At Northcote, we know that the true benefits of property investment come in the medium to long-term. Yet we look around and see only short-term partnerships between property sourcers and investors. This is a mismatch. Long term goals require long term partnerships. This is exactly what our Portfolio Consultancy service does, it forges real long-term relationships between us and you. Now, we want to be clear exactly what this partnership means for both sides. We want you to understand our incentives and motivations as well as we understand yours. We will always be upfront with our fees and have clearly outlined deliverables as part of this service, listed below: What you get - Initial portfolio review. - 20% discount on our sourcing fees. - Twice yearly report on the property market. - Regular consultations. - Quarterly strategy reviews, with bespoke analysis on your portfolio. - 2 year portfolio assessment (surveys provided by a third party). - Review any potential investment properties from any source (not just our own deals). - Free access to “C Property Market” innovative property data app, soon to hit the market. Fees - One time payment of 0.5% of portfolio value at the outset of the agreement (£1,000 minimum). - 10% of monthly gross rental yield. - 10% of annual growth of capital appreciation, paid every 2 years (measured during 2 year portfolio assessment). This represents excellent value for anyone looking to grow or consolidate their property portfolio going forward. Regular consultations, input on strategy, and tying our fees to the performance of your portfolio all ensure that our interests are the same as yours, at all times. This is the foundation of our service, we tend your portfolio as thoroughly as we do our own. How to build your portfolio on stable ground Our service is based on giving you analysis and strategic advice based on your circumstances and aims. However, when building a portfolio from scratch there is a roadmap to follow until your portfolio reaches the first goal: self-sustainability. Self-sustainability is when your portfolio is generating enough money in rental income per annum to buy a new property each year. This is an exciting take-off moment for your portfolio, after which taking on riskier, more profitable investments becomes more viable due to the stable base we’ve built. To get you there, we recommend investing in the bottom end of the rental market, where yields are relatively high and management costs relatively low – meaning they score well on our favourite metric: headache-per-pound! These properties range in value from £50,000 upward (with £50,000 a minimum to ensure they are mortgageable) with rental yields typically ranging from 8% upwards, with 8% quite common and rarer examples of yields as high as 15%. For the sake of our example here, we take a conservative approach to the numbers, modelling each property at a £60,000 purchase price and a 8% rental yield. This gives an overblown view of the purchase price and low average for the rental yield, giving a conservative overall picture. Overall rental yield per annum (£) 30000 25000 20000 15000 10000 5000 0 First Purchase Second Purchase Third Purchase Fourth Purchase Fifth Purchase Overall rental yield per annum (£) Figure 1: Model rental yield In the above model, each property gives a £4,800 per annum rental yield. Each of these properties can be purchased with only a £15,000 deposit, based on typical buy-to-let mortgages. This means that even with the most conservative figures you are still forecast to return £24,000 per annum in rent from a £75,000 investment. This represents fantastic cashflow and we haven’t even factored in capital appreciation – this is why property is such an excellent investment, it produces cash on a monthly basis and the asset appreciates in value at the same time. The real value of these properties is not their rental yield or financial return, instead it is in their stability. The areas in which we find these properties are home to long-term, low- maintenance tenants. We offer them a higher standard of living than is typical in the area, which is more than they can afford through purchasing, but well within their reach for renting. The tenants are local to the area, having lived there their whole lives, and often commute to work in bigger neighbouring cities. This is what we mean by low headache-per- pound. These properties give you a secure platform from which to build the rest of your portfolio. What to do next Once the portfolio is self-sustaining, then comes the fun part. This is where we can really mould the portfolio to your specific needs and goals. We spend time fully understanding your situation, what you need, model how best to pursue this, and identify property investments that get you there. Firstly, we will ensure that your portfolio is balanced between capital appreciation and rental yield. The balance between these two is important and is entirely determined by your long term goals. If you want to take an aggressive short-term approach, then the focus should be more on rental yield, producing cash to reinvest in your portfolio quickly. This then drives further cash flow growth. A more conservative approach in the short-term would be to focus on capital appreciation. Capital appreciation, although taking several years to accrue significantly, offers both protection from inflation and the opportunity to take a lump sum out of your portfolio, either through finance or sales. This lump sum can again be used conservatively or aggressively. The aggressive growth approach can be used to drive your portfolio forward, taking it to the next level. This can be achieved by taking on bigger projects, buying more cheap properties, or going for higher-value commercial property – where the rents are all but guaranteed, the capital appreciation usually high (due to the locations), and your tenants cover maintenance costs for the property. Alternatively, the money can be used to further consolidate your portfolio, investing in affluent areas that ensure security. Ultimately, the goal of balancing your portfolio is to spread your investments widely enough so that they are insulated from any shocks in the market and you are well-placed to take advantage of any changes in the market going forward. We are well-aware that it is those who are best positioned to take advantage of change before it can even be foreseen who profit most. By the time you are responding to change that is taking place, it is already too late to achieve maximal profit. This is why we want your portfolio spread out evenly. Sound good? This service is all about providing a professional thoroughness to your investing. Whether you’re interested in growth, consolidation, or both, we combine data analysis with practical knowledge to give you the best advice and guidance in your property investments. We take the time to understand your personal needs and help you to build a portfolio to match. By doing this we grow and secure your portfolio, ensuring your success. If this sounds good to you then we’d love to hear from you. Please contact us at [email protected] to book in a free initial consultation. Warm regards and happy investing, Northcote Property
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