Real Estate Investor Magazine South Africa Real Estate Investor Magazine - September 2017 | Page 53

UNITED KINGDOM HOW DO YOU INVEST REMOTELY FROM SOUTH AFRICA? It all comes down to understanding your local investment area and then working with a team of professional service providers and leveraging their well-established business processes and systems. My accountant and mortgage broker are based in London My attorney, builder (including various trades), in- surance broker and property management company are based within the Grimsby area. What does my end valuation look like? Most of my end valuations are around the £ 80,000 level. This is confirmed by an independent surveyor. Valuations are highly dependent on immediate location and type of property and are subject to change considerably. So please do your investment due diligence very carefully. What does my mortgage loan look like? Mortgage Loan = 75% loan to value of end valuation of £ 80,000 = £ 60 000 What does my gross rental yields look like? What does my capital purchase cost look like? Purchase Cost Project Management & Refurbishment Stamp Duty Furnishings Survey Solicitors Fees Mortgage Broker Fees Capital Purchase Cost £ 60,000 £ 10,000 £ 1500 £ 0 £ 400 £ 800 £ 500 £ 73 200 Gross Yield = Annual Gross Rental / Capital Purchase Cost = £ 8 400 / £ 73 200 = 11% per annum What capital remains invested? Capital Invested = Capital Purchase Cost – Mortgage Loan = £ 73,200 - £ 60,000 = £ 13,200 What does my return on investment look like? What does my monthly cash flow look like? Return On Investment = Net Annual Cash Flow / Capital Invested = £ 4 320 / £ 13,200 = 32% per annum LOCATION, LOCATION, LOCATION Having multiple income streams within one terraced property is one way to mitigate your risk. The rental income that you receive from one of the flats usually covers all of your monthly expenses, therefore if you have a non- paying tenant in one flat, the overall expenses should still be covered by the rent from the other flat. Additionally, we have good access to ‘Rental Guarantee’ prod- ucts where if a tenant defaults, the insurance kicks in and the rent is covered. Landlords insurance is in place to cover tenant and third party liabilities and building insurance is in place to cover property damage. We currently use a company called Letsand Property Man- agement in Grimsby, which manages UKPP’s portfolio. Letsand have a very strict and disciplined tenant screening process to make sure we get the best possible tenant in place. Monthly Rent (£350 per flat x 2) £ 700 Mortgage Repayment - £ 200 Property Management - £ 70 Other Operating Expenses * - £ 70 Net Monthly Cash Flow £ 360 *Other operating expenses include building insurance, an annual gas certificate and a budget for maintenance. One of the big differences and benefits of Investing in UK Buy- to- lets over South African Buy- to- lets is that the tenant is responsible for council tax, gas, electricity & water. Therefore if a tenant vacates and the bills are unpaid, the debt will follow the tenant and be claimed from him and NOT the landlord. We focus on properties located close to the Town centre, railway stations, bus terminals, retail shop- ping centre’s, hospitals, universities, and colleges. Being within a 10-minute walk of the Town centre or a main transport route is critical. How do I manage my investment risks? Can South African’s invest in the United Kingdom? Most certainly yes! Setting yourself up in the right investment structure is critical to enabling the funding. Furthermore, ensuring that you have in-depth local knowledge about your investment area is essential to getting it right! SA Real Estate Investor Magazine SEPTEMBER 2017 51