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Fixed income: 10 is the magic number

10% NET annual every year
Feb 9, 2017

For most buy-to-let landlords, a NET yield of 7% is the kind of rental return that would be the jewel in their portfolio’s crown.

So a fixed NET income of 8-10% is something really worth investigating.

And when that fixed income is offered for a contracted 10-year period, it’s almost irresistible – what business wouldn’t give its right arm to know accurately what its quarterly income is going to be for the next 10 years?

Some traditional landlords may feel that 8-10% NET for 10 years seems unrealistic; on the contrary, it’s absolutely realistic and we’ve been consistently proving it right across our student property portfolio.

 

So, how?

The first step is a painstaking research and due diligence process, which is designed to identify long-term student demand and therefore long-term investor appeal.

The objective is to handpick ambitious universities where students are keen to get a place, but in towns and cities which struggle to provide the accommodation that students prefer – purpose built studios and en-suites.

We avoid the capital and over-expensive regional centres, concentrating instead on up-and-coming places where a proven consistent increase in student numbers is matched only by a significant shortfall in designated student property – a shortfall that is not going to be meaningfully reduced in the foreseeable future.

We also like areas where HMO licensing is discouraged by the authorities, since this limits the availability of residential property conversions to students – effectively funnelling them into our properties.

Most importantly, we ensure that we are able to purchase a plot, or existing property, in a prime close-to-campus spot – without having to pay over the odds.

The key is to limit the number of Purpose Built Student Accommodation units that sit between your property and the university – ensuring sustained demand regardless of student numbers.

Once a plot or property has been identified, rather than cashing in quickly via inflated sales prices and moving swiftly on, our developer chooses to retain an active interest in the property. This means their profit will come from a long-term commitment to consistent rental growth.

They do this by retaining the freehold and taking on the responsibility for renting and managing the property long term – with an initial 10-year agreement with individual unit owners.

And, with most developments consisting of at least 100 units, this also means that the initial site purchase price can be divided into easily affordable amounts – along with other economies of scale that make the construction and management of our properties far more cost-effective than for a standalone residential house.

The developer’s ongoing involvement means the very highest standards of construction, including a unique 10-year warranty on new builds. And to protect the long-term value of their asset, (which is also your asset), they appoint an incentivised onsite professional management team to run all aspects of the property 24/7.

 

And the result?

High yielding property investments

Together we have now delivered 16 student developments in key undersupplied UK cities, with the diggers now making a start on the 17th.

We have also partnered them in a highly successful Luxury Serviced Apartments & Spa complex on the North Devon coast.

Another benefit of our 8-10% NET for 10 years offering is that both the fixed yields and the remaining income term are fully transferable at resale, making your property even more attractive to prospective buyers and offering you total flexibility.

This is what results in the potential for capital growth through yield compression – whereby you reduce the yields at resale, while still providing an appealing proposition to new buyers.

This is not something that works on many of our competitor properties, where yields start lower and fixed income periods last longer.

 

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