1. Lack of diversification
Buy-to-let investors often acquire only a handful of properties. In fact, some commit their entire pool of funds into a single flat. While residential property is inherently a lower risk asset class, it still carries risk that could be mitigated. The neighbourhood may under-perform. The tenants may default. The property could flood, or stay empty for a time – the list goes on. Property Partner makes it easy to spread your investments across multiple sites – a highly prized service in this industry. Our director of property recommends a minimum of twenty properties for a sufficiently diversified portfolio. So far, one in five of our investors have put their capital in more than ten properties, and 45 percent have invested in at least three. Over 250 have invested in more than 30 properties.
2. Difficulty in selling
A key requirement for any investment is the ability to exit when required. Even the strongest property investment can be marred if capital is tied up for months (or years), when it’s much needed elsewhere. Our unique Resale market solves this. Shares can be sold to other investors through our platform, often in days. And for long-term holdings there’s always the reassurance of our five yearly exit guarantee, at which point investors are offered a sale price at fair market value – with no fees.
3. Minimal research
Where to buy? And what type of property offers the highest return for buy-to-let investors? These are critical questions that require deep specialist knowledge to address well. All too often, investors stay in their own neighbourhood without knowledge of the full UK market – and often because it’s more convenient to manage. Property Partner investors can proceed knowing that their options are curated by industry experts, led by our Director of Property, Robert Weaver – former Global Director of Residential Investment at RBS, and a member of the British Property Federation’s Residential Committee. His team bring decades of industry experience, which allows them to identify outstanding investment opportunities, wherever they are.
4. High upfront costs, and management fees
Lone investors are hit by multiple charges. There are legal fees, letting agent finder fees, service charges, advertising fees to let, repairs, internal and exterior maintenance and, of course, management fees. A 2015 survey revealed half of landlords forget at least one cost, and one in 8 didn’t factor in any. Management fees alone can amount to 17 to 20 percent of the rental income. Property Partner runs at scale, and with this comes considerable cost savings. You can invest with a one-off 2% charge, and ongoing management fees are cut to 10.5 percent of rental income (a fee already factored into the dividend yield you see).
5. Lack of negotiating power
Another bane of the buy-to-let investor, is the difficulty in negotiating a sale price. Vendors have little incentive to discount, and with good reason. They incur fixed costs when selling, so would rather save better deals for bulk buyers. Property Partner brings substantial buying power to each deal, generally purchasing multiple units in a block, moving fast, and always buying in cash. This means significant savings on the sale price, which translates to an enhanced yield for the investor.
6. Uncertain progress
How is your investment performing? Is it beating the market – or are there better opportunities elsewhere? Most landlords aren’t sure much of the time. It takes time and energy to monitor local transactions to determine a property’s appreciation. With us, every investor is given regular updates. Each property is valued every quarter by an independent RICS surveyor to show how prices have changed. Furthermore, all data is published in our transparency blog Open House, and can be downloaded in Excel for analysis, including the prices shares have sold for. The Property Partner Resale market also provides a live guide to prices – showing what shares are being listed for all properties on the platform, along with what investors are bidding for them. Now, your portfolio can be benchmarked.
7. One time investment
Many landlords will save up for months before spending their entire capital on a single transaction – another unfortunate aspect of traditional property investment. This one-time hit is inefficient and inadvisable for many reasons. Firstly, there’s a dead period before the transaction is made, in which funds aren’t being put to work. Secondly, committing your capital all in a single transaction is risky and assumes that the market is favourable – a hard call to make. If more funds become available post-transaction, these must sit dormant until the next investment round. Property Partner solves this by offering a way to invest in multiple tranches over time, across cycles in the market, and in varying capital sizes. You also start earning rental income from the moment you commit funds to invest.
8. Bad tenants
This is a considerable source of anxiety for landlords. Bad tenants can refuse to pay rent, squatting until removed by court order. Some may damage a property, or just disappear at a moment’s notice. The result is the same: serious damage to the landlord’s income, and in the worst cases, a default on the mortgage. We mitigate the risk for our investors, in three ways. The first is through professional property management. Lettings are handled by an experienced team, who interview, manage, and service tenants to minimise disruption. The second is by making allowances for void periods, which are already factored in for the investor. Finally, if disruption exceeds the allowances made, these can be diluted through diversification, made easy through our platform. That being said, we have met or exceeded all of our rental forecasts to date.
9. Considerable stress
All things considered buy-to-let investing, for many, is more hassle than it’s worth. Worries about property investment aren’t necessarily misplaced, as a single overlooked factor can cause serious harm to a buy-to-let deal and its returns. At Property Partner, this is all removed. We take care of all legal and logistical issues, and our model incorporates precautions to maximise financial stability. Moreover, each property is held in a tax-efficient special purpose vehicle, and ring-fenced from Property Partner itself, and other investments on the platform. We’ve built a transparent service, regulated by the FCA and audited by KPMG, offering the most efficient way to invest in buy-to-let property – and we will strive to continually improve. Hopefully, lower stress is just one of the dividends.