Real Estate Investor Magazine South Africa Real Estate Investor Magazine - July 2017 | Page 51

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 £ 225,000
= £ 168,750
WHAT DOES MY GROSS RENTAL YIELDS LOOK LIKE?
GROSS YIELD = Annual Gross Rental / Capital Purchase Cost

= £ 28,080 / £ 214,250

= 13% per annum
WHAT CAPITAL REMAINS INVESTED?
CAPITAL INVESTED = Capital Purchase Cost – Mortgage Loan

= £ 214,250 - £ 168,750

= £ 45,500

WHAT DOES MY RETURN ON INVESTMENT LOOK LIKE?
RETURN ON INVESTMENT = Net Annual Cash Flow / Capital Invested

= £ 8,280 / £ 45,500

= 18% per annum
Next month, we’ll be continuing the discussion on
HMO investments, with a focus on the management
of investment risks and the practicality of this type of
investment for South Africans.
How do I manage my investment risks?
Multiple income streams over one asset, in my
investment opinion, reduces the investment risk
tremendously. If one of my rooms becomes vacant in a
6-bedroom HMO, I am still receiving the other 83%
of my rental income.
If the room rental market shifts or changes for
the worse, I have the option to convert the property
back into a buy to let rental or resale the property to
a family without any risk of capital loss, as I have not
over-capitalized.
Landlords insurance is in place to cover tenant and
third party liabilities.
Building and contents insurance is in place to cover
property and content damages and theft.
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, leveraging from their
well-established business processes and systems as
you go.
My accountant and mortgage broker are based
in London. While my project manager, architect,
builder (including various trades), insurance broker
and property management company are based within
Birmingham.
Do you require an HMO license?
You must have a license if you’re renting out a large
www.reimag.co.za
HMO. Your property is defined as a large HMO if all
of the following apply:
• it’s rented to 5 or more people who form more than
1 household
• it’s at least 3 storeys high
• tenants share toilet, bathroom or kitchen facilities
Even if your property is smaller and rented to fewer
people, you may still need a license depending on the
area. You will need to check with the local council.
What do I need to make sure of when investing in HMO’s?
In order to comply with legislation, I share the below key critical
items to have in place:
• the house is suitable for the number of occupants (in terms
of, for example, size and facilities);
• the manager of the house - you or an agent - is considered
to be ‘fit and proper’, this includes: no criminal record, or
breach of landlord laws or code of practice;
• send the council an updated gas safety certificate each year;
• install and maintain smoke alarms, heat detectors and
carbon monoxide alarms;
• provide necessary safety protection measures, including fire
doors, fire blankets and emergency lighting;
• provide safety certificates for all electrical appliances when
requested.
The council may add other conditions to your license, such as
improving the standard of your facilities. The council will let
you know when you apply.
How do I apply for an HMO license?
If you have a large HMO or your local council requires
an HMO license, you should follow the below steps in
order to apply for an HMO license:
• Contact your council for a license to rent out your
property as a house in multiple occupation (HMO)
in England or Wales.
• You should apply for the license yourself, but if you
use a managing agent they can apply for you.
• You’ll be charged a fee which is set by the council.
Can South Africans invest in the United
Kingdom?
Most certainly yes. However, setting yourself up in
the right investment structure is critical to enabling
the funding. Furthermore, ensuring you have in-
depth local knowledge about your investment area is
essential to ensure you get it right!
Warren Brusse is the Chief Financial Officer of
United Kingdom Property Partners
RESOURCES
Property Partners
JULY 2017 SA Real Estate Investor
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