PM SPV 74
Buy to Sell Renovation Project of a 4 Bedroom Mid-Terrace
About this property
This is an opportunity to invest in a property which is being acquired, renovated and then placed on the open market for sale. The property will not be advertised for rent and we will seek to sell the property for the best price and as quickly as possible.
The average period for selling a property in the North East is 10 weeks and, for the purposes of the calculations, we have assumed a total deal period of 6 months from completion to sale. The total projected return for this transaction is 19.94% which, over a 6-month period, then gives an annualised return of 39.87%. Depending on the time to sell, this will either increase or decrease the annualised return you receive.
We also assume in our calculations that we will only achieve 92% of the open market value but will, of course, push to achieve the maximum price with investors having the opportunity to vote on sales price in the usual way.
The property is planned to be funded with 25% equity (from this investment) and a 75% loan from the associated PMF investment available on the platform now. The interest rate payable on this loan will be 0.75% per month and it will be secured by a 1st charge on the property and a charge against the SPV. The total LTV of the loan is 58% giving plenty of headroom to all parties.
We will shortly be publishing a blog on our new Buy to Sell investments but, in the meantime, to ensure that a property is not left for a prolonged period without use, if the property is not sold or a sale agreed within 12 months, then the property will be placed back on the Property Moose platform as a buy to let investment for funding, unless 75% of the equity investors vote to sell the property in an auction.
The property is a large 4 bedroom, mid-terrace, which benefits from an extension to the rear. The property comprises of double glazed windows and UPVC doors, and a front facing bay window. There is also a small yard to the front and back of the property. The entrance hallway leads into a dining area, a separate lounge area and a kitchen. The kitchen is towards the back of the house and overlooks the yard area. The main family bathroom also sits at the back of the house on the ground floor. Upstairs leads to 1 single bedroom and 3 double bedrooms, one of which is considered the ‘granny flat’ (which was included in the extension) and benefits from its own toilet and wash area.
As shown in the images, the property’s décor is dated and not suitable for immediate let. Therefore, the property is due to be renovated as part of the project. Such renovation works will include:
- Full damp proof course
- Full re-plaster
- Full re-decoration including painting and new flooring
- New central heating system
- Update of electrical system
We have received a quote of £10,000 for the renovation, which we expect to be completed within 8 weeks. This estimated time-frame takes into account presumed delays over the Christmas season. For buy-to-let buyers, we expect the property will be in a desirable condition and let at more than £500 per calendar month.
The property is located in Shotton Colliery, a quaint village in County Durham. The village centre is easily reached in a 3-minute walk, where tenants can access a supermarket, banks and schools. For larger amenities, Castle Dene shopping centre is less than a 10-minute drive east to Peterlee, and by travelling west, Durham city centre can be reached in a 20-minute drive.
Two market appraisals carried out on the 28th November value the property at £79,950 and £80,000 respectively as an asking price after the £10,000 renovation works. Using the average of the two values, £79,975, this equates to the property being purchased at a discount of £24,975 (31.2%) to the open market value (£45,000 purchase price + £10,000 renovation).
Full Financials are as follows:
|Initial Finance Fees:||£1,747.50|
|Insurance (for 12 months):||£220 (to be rebated as applicable)|
|Property Moose Fee:||£2,999.88|
|Total Costs = £62,997.38|
|Asking Price (after renovation):||£79,975|
|Estimated Sales Price:||£73,577|
|Less PM: Management Fees:||£599.98||Less Sales Fees & Legals:||£1971|
|Less Loan plus interest:||£47,023|
|Less Equity Investment:||£18,000|
|Projected Gross Return:||£4,486|
|Less PM Profit Share:||£897|
|Less Corporation Tax:||£897||Net Return:||£3,589 (19.94% of equity invested)|
|Projected Term = 6 months|
|Annualised Return = 39.87%|
About the area
The property sits within a twenty-minute drive to Durham University, which is a popular choice for students after topping a student quality of live survey in 2013.
In 2015 the university was listed to have the best value for money in the country for students pursuing further education. In addition, the university continuously strives towards improvement, with a recent investment of £60 million through ‘The Durham Project.’ This is intended to strengthen the facilities and opportunities open to students. Given the numerous attractions, it’s no surprise that the university has ranked in the top five universities in the UK for the past seven years.
The region is also home to growing technology businesses such as Atom Bank, the UK’s first exclusively digital bank that has chosen the North East as the new headquarters for the company and aims to host 400 employees in the area by 2020. With a recent [LINK: ] investment of £45 million from Spanish banking group, BBVA, it is improving the fintech opportunities for future generations. BBVA is already creating synergies with Durham University by giving students the opportunity to work for the company. Due to the job opportunities available, it’s clear why the North East is a popular choice for students, as evidenced by Durham University topping a student quality of life survey in 2013.