How to boost your income by housing generation rent
IN 2007, before the financial crisis, around 9 per cent of people outside London lived in rented accommodation. Today, that proportion has doubled and it is projected to hit 25 per cent within the next few years.
Many of these people live in blocks of flats owned by individual private landlords, who bought on a buy-to-let basis, or small regional property companies, who thought they would be able to sell the properties to their tenants.
The buy-to-let market has become much less attractive due to tougher tax rules, however, while increasing numbers of people simply cannot afford to buy their own homes.
Many block owners need to find a third way and Multifamily Housing Reit presents just such an opportunity. The company focuses on buying and managing blocks of flats in and around Bristol, Birmingham, Leeds, Manchester and Norwich, with an average rent of £ 600 a month, ideally suited to teachers, nurses, office and factory workers.
It looks for existing blocks with tenants already in them. Unlike property firms that build homes to rent, that means the business will generate income from the start and there is no development risk. As one of the first large firms to operate in this area, Multifamily also sees numerous opportunities and can buy properties at good prices.
The group has amassed the seed portfolio over the past three years, comprising 658 homes in 22 sites, all of which have been built in the past decade or so. Once the properties are acquired, chief executive Jonathan Whittingham and his team improve them – refurbishing common parts, landscaping gardens, building bike sheds and such like. They also visit each tenant, upgrade flats where necessary and use apps and websites to make it easy for tenants to let them know of any issues, such as blocked drains or faulty heating.
Importantly, too, each of Multifamily’s five regions has dedicated managers to liaise with tenants, help them out and make them feel part of a community. Results have been impressive – tenants stay longer, the number of vacant homes has declined and average costs have been cut. Further improvements are expected as the portfolio grows and achieves greater economies of scale.
The group intends to float on the stock market in the next couple of weeks, raising £ 175 million to £250 million. Shares will be 100p each, there is a minimum application of £1,000 and Whittingham is targeting a 4 per cent dividend yield in year one, rising to at least 5 per cent thereafter. He also hopes to deliver a steady increase in the share price, creating a total return of 10 per cent or more per year. Multifamily’s seed portfolio is worth £70 million with a pipeline valued at £400 million. The company is being spun out of Harwood Capital, an investment firm run by the highly successful and veteran investor Christopher Mills. Mills and his fellow investors at Harwood are putting in almost £20 million of their own money, signalling their confidence in this new company. The market is huge and Whittingham hopes to build Multifamily up to a £1 billion business over the next few years so he is likely to come back to the market for more money in short order. If all goes according to plan, however, the share price should rise and subsequent fundraisings will be at more than 100p a share.