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  • Buy-to-Let

    Valuing a portfolio for sale?



    Can any of you experts out there please advise me on how best to get a balanced valuation on our buy to let property portfolio?.  I have had one commercial valuation based on income and another from estate agent which seems to have been assessed on sold prices in each street ?.  In addition our experience with some potential agents / middle men is that we must be desperate to sell ?‍♀️.

    Any advice appreciated , too much hard toil has gone in over the years to let it go under value.

    Thanks

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    Hi Jasmine,

    Perhaps have a look at Vesta, a platform which specialises in portfolio sales with tenants in situ, meaning no loss of rent to yourself during the sales process.

    I believe they assist with valuing the portfolio prior to adding it to their platform.  They have sold over £23million of property since their inception in 2018 and are in daily contact with landlords, investors, hedge funds etc. who are all looking to buy portfolios.

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    Depending on how large the portfolio there are various options.

    A house is only worth what others of similar type in an area have sold for regardless of whether they have a tenant or not. This is the easiest way to value it, by having each property valued individually.

    If you are looking to sell all together with sitting tenants then the buyer is going to be looking for a large discount on the overall price of each property by taking them all together. Maybe 20% for a quick sale.

    If the portfolio is small then sell one or two a year so you can use your annual CGT Allowance.  A commercial valuation based on income is the difficult one. There are a lot of commercial properties undervalued on this basis because the property/land is worth far more than the business valuation. Not an expert so tread carefully .

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    You’ll probably get more if your portfolio is outside London and if you sell based on yield but a buyer will know that.

    id recommend starting at that and be prepared to negotiate.

    if CGT is a consideration do look a pre-sale structuring, it can make a significant difference.

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    Hi Jasmine

    I have been involved with many portfolio valuations for banks and can tell you there isn't a right or wrong way to go about it.  Omar is correct in saying that a house is worth what someone will pay and the default value will nearly always be the vacant possession VP value.  It's different with commercial property which is sold on a yield basis, so the better the tenant and longer the lease the higher the value.  Residential yields tend to be low; by and large resi property in the UK is not sold on an investment basis.  Having said that there are times when a decent portfolio has some added value and this has partly been suggested by another contributor.

    If the properties are in good order with a demonstrable rental income and decent tenants then there may well be some investment value.  A premium generally comes if the properties are of a similar type, perhaps all terraces in the same area or flats in the same block.  This makes management easier.

    A portfolio purchaser may not be subject to the 3% stamp duty penalty so, again there may be some merit in a wholesale sale off.

    In terms of restructuring, have you thought of going down the corporate route?  You can transfer the properties free of CGT and SD (assuming you get decent advice) and then sell the shares in the company.   Depending on how may properties you have and the nature of them, this may be an attractive proposition for the market.

    I think you need to sit down with a chartered surveyor who has expertise in investment sales and a good property accountant to work out your exit strategy.

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    Hi Jasmine,

    Please do reach out to us at Vesta, as we specialise in helping landlords to buy and sell BTL properties with tenants in place, whether that's individual houses, apartments, HMOs or larger portfolios and apartment blocks.

    You can see some of the portfolios we're marketing by clicking here

    You'll be able to tell by the way we present the properties that we're very much focused on selling the properties as an investment (hence the focus on yields for example as opposed to flowery language about bay windows and south facing gardens)!

    In terms or valuation, we'd be happy to discuss this with you.

    As Graham and Omar both rightly state, the vacant possession valuation is an anchor point for many investors driven by the fact that the banks will lend on this basis (i.e. that's their collateral) and because it represents the larger part of the housing market and so may be an exit option for a buyer (although it doesn't have to be).

    However, many investors will also take a yield based approach to valuing the property, typically using both the "bricks & mortar" value as well as the yield value in order to triangulate to a range of what they think the property is worth. Unlike the bricks & mortar approach (which is usually easier to assess by looking at local and recent sales price comparables), the yield base valuation will be specific from investor to investor as it will depend on their own assumptions around operating costs, their cost of capital, their investment horizon etc. So it's more difficult to ascertain this definitively.

    Needless to say that the price is also determined by your motivation and time frames to sell the property!

    At Vesta, we specialise in helping landlords to market their portfolio to both funds and family offices at the larger end of the scale, as well as on a unit-by-unit basis to smaller landlords.

    That way we can run a dual sales process to ensure that we're covering all bases.

    Furthermore, because you'd be selling with tenants in place then you preserve your rental income throughout the sales process and can probably afford to be more patient to achieve the right price.

    Please feel free to reach out as we'd love to discuss how we could possibly help and give you some thoughts as to the valuation of your portfolio.

    Kind regards,

    Vesta Property

    https://www.vestaproperty.com

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