Our Approach to Property Investment Exits

As you may know, we recently completed our first successful exit, and many of our properties are nearing the ends of their terms. Our unique nominee structure, and technology gives you the opportunity to vote on the exit strategy on properties at the end of the term.

We have been working hard to provide more choice for our members and create a sustainable approach to property exits. To help you make an informed decision, we wanted to take the time to explain the 3 voting options on offer for each exit as well as the mechanism and policies behind valuations and steps taken.

We have devised these strategies as many of our members understand that property investment is a medium to long-term investment strategy and wish to remain invested in properties for multiple terms. By creating ‘Option 2’ below, this gives those investors the chance to stay in the property and any investors who want to sell to come out.

Valuations

Before an exit is due, Property Moose will instruct a third party valuation and circulate an exit pack detailing the current value, condition, any works that are required and giving the rental performance and accounts. This will then be used to establish the net asset value of the SPV and, therefore, the estimated potential returns per share sold for the different options.

Our valuation will give a market asking price and we will then use the average achieved percentage for that area to establish a sale price (or the 4-week achievable value if provided). Typically, this is 95% of the asking price but can be anywhere between 90% – 100% depending on the property.

Where a property requires renovation to achieve its full value, we will take the cost of these works off the value to establish the “fair value” of any onward sale to the crowd under ‘Option 2’ below. For example, if a property is valued at £60,000 with a renovation that would cost £10,000:

Fair Value: £57,000 (95% of £60,000)
Less Renovation: (£10,000)
Fair Value: £47,000

Option 1 – Retaining your shares

If you choose this option, the property will be resold to the crowd, though you will continue to own your individual shares in the new property SPV. If a property is producing a strong yield, it might be worth retaining your shares, especially considering property should be treated as a medium to long-term investment to maximise potential value.

Upon a relisting, we will raise the usual provision funds and amounts to cover insurance, in addition to any renovation costs required. Our funding fee is reduced to 3% on re-listing of properties, which includes the FCA and transaction fees of processing the listing.

Option 2 – Sale to the crowd

Rather than putting the property on the open market and waiting for offers, if you vote for option 2, we will re-list your shares on the Property Moose platform as a new opportunity. Although you will lose your shareholding, the property will still be an asset on the Property Moose platform. We believe this option provides speed and certainty instead of an unknown market risk created via the open market.

Option 3 – Open market sale

The final option is to list the property for sale on the open market. This may achieve a higher sale price but will, almost certainly, take a significantly longer time to finalise and will result in additional costs. It’s important to bear in mind that it can take several months to process a sale on the open market and it may be necessary to undertake remedial works and evict the tenant before a sale can be achieved. We believe this option provides the potential for a higher return, but an unknown time frame and sale price.

For individuals who wish to exit, options 2 and 3 provide an opportunity to do so. However, on the open market, this price is not guaranteed, and neither is the time it will take to sell.

Disclaimer and Legals

Property Moose does not provide any advice in relation to investments and you must rely on your own due diligence before investing. Please remember that property prices can go down as well as up and that all figures, rates and yields are projections only and should not be relied on. If in doubt, please seek the advice of a financial adviser. Potential exits are contingent upon a successful fundraise and implementation of the business plan. Your capital is at risk if you invest. This post has been approved as a financial promotion by Resolution Compliance Limited.

Property Moose is a trading name of Crowd Fin Limited which is an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority (no: 574048).

The post Our Approach to Property Investment Exits appeared first on Economoose.