Our Assured Rental Portfolio: Statistics For The Last 12 Months
The House Crowd started off in March 2012 buying small terraced houses for around £50,000. As our database grew, it became easier to raise funds and the company has evolved to financing multi-million-pound developments; however, the familiarity of the original buy to let concept, is still popular with many of our developers.
We found during our first four years that renting at the low end of the market is met with some difficulties. Despite our best intentions to provide good quality homes for people, with the expectation they would respect and look after the property, in too many cases (around 20%) non-payment of rent and damage to the property, were undermining the returns we could pay. Our plan was to find a way to satisfy the demand for this type of property, whilst delivering predictable and consistent returns for our investors.
And, I am pleased to say that we found a solution that has proven to work very well in delivering both exceptionally high gross yields and net returns.
That solution is our Assured Rental Product.
We launched our first one in January 2016 and over the course of 2016 purchased 16 more. They have all performed exactly as detailed in our financial forecasts for each project and delivered an average of 9.2% gross yield and 5.6% net return to investors after all costs, fees and corporation tax. This should make it ideal for those who want a long-term, income-producing investment backed by bricks and mortar.
The only real disadvantage to these investments is that the criteria of the corporate tenant we work can be very precise. It is time-consuming to find and convert properties according to their specifications and therefore we pay a premium for that.
The properties are treated and valued by surveyors as commercial properties. This means to achieve an uplift on a sale in the future, it will probably be necessary to sell the property to an investor, which undoubtedly limits the exit market; however, we believe high yielding properties with assured rental agreements in place will be attractive to many prospective investor purchasers.
For those not familiar with the assured rental product, here are the important facts:
- The properties are let as HMOs to a large corporation on a five-year assured rental agreement
- The corporate tenant is responsible for all maintenance costs up to £5000 per year
- There are no void periods
- Rent is paid two months in arrears but to date has been paid on time every time
- The properties produce a gross yield of 9-10%
- The average net yield is 8.5%
- The average net return to investors after all costs is 5.6%
- Dividends are paid quarterly
- All properties purchased to date have delivered returns as forecast