Why Invest in a PI Syndicate?
Direct investment, ownership & control
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Harbour House, Southwick, Brighton
A fully tenanted (freehold) residential block consisting of 21 apartments situated in Southwick, Brighton. The Harbour House syndicate provides investors with the ideal property investment in an area which has strong demand for sales and rental property.
- 5.13% p.a. tenanted rental income. Paid quarterly
- Excellent seafront location. Only minutes away from Brighton city centre, beach and its famous pier
- Approx. £640,000/16.8% capital uplift on purchase. Benefit of bulk purchase
- Capital growth in area: 4.8% per annum from 2010 to 2020
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Approx. 9% p.a. (rent + capital uplift)
£ 40,945 – 1,023,625
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After you have committed to a specific investment amount in the nominated syndicate, you will be provided with the bank account details for lawyers (Druces) who will act for the syndicate. Druces will hold your monies in their escrow bank account until the syndicate is fully subscribed. Upon membership of the syndicate you will be required to vote on important management issues.
Pi investment experience
The property syndicate Managers
Target Return: Assured income and capital gain
Legal structure, syndicate set-up and conveyancing
Direct control of your asset and e-voting:
In order to ensure a syndicate passes the ‘control test’ syndicate members are required to be involved to make decisions on how the syndicate deals with certain management issues. The Syndicate Manager (Pi) will appoint professional advisers and property managers to deal with day to day running of many aspects the property e.g. collecting rent, lease queries, maintenance, services e.t.c., but you will still be involved periodically and need to make yourself available for key decisions. Decision making and voting on key issues and management will be facilitated by a tailored voting platform independently run by Mi-Voice, which enables syndicate members a to have a direct say in proportion with their investment. The voting platform is independently run by Mi-Voice with a host of features including secure encryption log-in, unique member voting codes, voting confirmation, anonymous voting, real time reporting.
PI Syndicate Shield
Investment pledge funds held directly in lawyer escrow account until until completion
Direct ownership and share of equity of title
Direct control and management
Individual liquidity/Exit of investment:
The investment strategy focuses on maximising investment returns whilst minimising risks. It does this by purchasing property at an attractive price to that of the market value; in an area with a shortage to that of demand in sales and lettings; ensuring there is a steady rental income with the potential for a capital uplift. The principal focus is to secure a private and affordable housing investment. Where the tenancy is private, tenants are vetted to ensure they have a good tenant history. If the tenancy is to a Housing Association, prior to purchase we approach the relevant Housing Association to gain an expression of interest, to ensure the smooth flow of the tenancy by the Housing Association upon purchase completion of the property. This will provide investors with a secure and steady rental income with general maintenance the responsibility of the Housing Association.
As the syndicate manager, Pi will prepare financial analysis to determine projected investor return and confirm suitability for syndication of a given property. Once confirmed suitable for syndication, Pi will prepare a prospectus for investor circulation, consideration and expression of interest. Initial due diligence is carried out to establish that a property is in a location that has a need for rental accomodation and purchase. Research is conducted to analyze comparable prices of similar properties sold and rental incomes. Local employment, transport links and amenities are also considered. A ‘RICS’ (Royal Institute of Chartered Surveyors) forms part of the legal conveyancing. This establishes whether the purchase price is a fair value, the condition of the property and if there are any issues with the structure of the property, as well as energy ratings.
The principal benefit of securing a fixed tenancy contract with a Housing Association is the security of income, with no void periods. No Housing Association has defaulted on rental payments. Additionally, the Housing Association is responsible for the maintenance costs during the tenancy term. The ability for investors to receive an assured rental income, with no void periods or maintenance costs for an agreed period of time, makes this form of tenancy and investment ideal to investors who wish lucrative returns will a very low level of risk.
The minimum investment is 1% of the syndicate offering. Please refer to each syndicate offering which will stipulate that the exact amount is.
The maximum investment is 25% of the syndicate price and associated fees. This is to ensure that no one member has a majority stake in the syndicate. The exact maximum amount will be stipulated in each syndicate offering.
Investing in residential property is not possible with pension/Sipp money.
In the event that a syndicate member, the monies held in the legal firm's (Druces) escrow account will be returned. The typical syndicate offer time will have a duration of no more than 90-days to be subscribed. As soon as syndicate is fully subscribed the purchase and legal conveyancing work will commence.
No, although using finance can enhance the investment return, using leverage does carry a greater level risk. Additionally, ability to buy a property in cash and move quickly compared to that of using bank finance is important. In some syndicate offerings that could be the option to mortgage the property subsequent to purchase to provide the enhanced return, in this event it would be clearly stipulated at the outset.
As part of the extensive due diligence that undertaken prior to purchase, the use comparable. prices, where possible, assist in ascertaining value. Additionally, all properties will benefit from a RICS (chartered surveyor) survey. The RICS survey report details the condition of the property and its value.
At the end of the investment term, the syndicate and limited company that the property is held within will be dissolved. The net sale proceeds will be distributed to syndicate members proportionally to their percentage investment held.
Each syndicate will have a stated investment period within the Information Memorandum (IM). This is a legal document which will constitute the investment offering. Typically, the minimum investment term will be 5-years and the maximum term 7 years, making it ideal for investors who wish a medium to long term investment. Importantly Syndicate members have the potential to exit the investment term prior to the end of the stated term. Please refer the section ‘Can I exit the investment term early.’
Individual liquidity/Exit of investment:
A sale, or transfer, of the property share is freely transferable and can take place at any time during the Syndicate Member’s ownership and does not require the sale of the whole property at that time. As the syndicate manager, Pi is authorised to co-ordinate and assist in the sale of a syndicate holding by promoting it to its approved client base. An administration fee of c.£1,000 plus VAT (including all legal documentation) is payable for this service. A valuation will need to be agreed but otherwise the transfer of the property share is usually completed within two or three weeks – thus giving far greater liquidity than is available in many cases within the direct property investment market.
All investor monies are directly paid by the investor to an Escrow account of the lawyer (Druce’s) who will provide the legal expertise in handling the acquisition and sale of the property and will undertake all aspects of the legal work in setting up the syndicates and the buying and selling of properties within the syndicates.
As in any investment there is always an element of risk. We take care to minimise any risk, by securing a fixed term tenancy contract with the relevant Housing Association. Investors have no personal liability, i.e. worst case is that the investor's loss will be no greater than the initial investment. At the exit of the investment term, typically a minimum of 5-years the property will be sold. It is possible that the property may be worth less than the initial purchase price. This is however unlikely given that the property is normally acquired for less than the normal market value, and the UK residential property prices have historically appreciated in the medium to long term. We envisage that in additional to investors receiving an assured rental income throughout the investment term, a capital gain will also be realised.
Management & Control
All syndicate members have a direct say in the control and management of the syndicate. Whilst the principal considerations are detailed in the Investment Memorandum (IM), the will be issues that may arise in which syndicated members are required to vote on. This voting on such issues will be done via the use of Mi-Voice and their secure E-voting platform. For a greater explanation about Mi-Voice please refer to the section within 'What is a syndicate'.
In order to pass the ‘control test’ of a property syndicate, it is necessary for syndicate members to partake in important investment decisions. This will be facilitated by Mi-Voice, who are leaders in their field on secure on-line voting.
Mi-Voice takes great care to ensure only valid members with various security measures. They have regularly conducted balloting for the Police Federation, Foriegn & Commonwealth Office amongst others.
All the legal conveyancing work is carried out by Druces. They pioneered investment in property by syndication for private investors more than 20 years ago. To date they have concluded in excess of 300 private property syndicates.
Druce’s will carry out all the legal conveyancing work associated when buying a U.K. property. As syndicate manager Pi will also provided detailed analysis of the property, area, comparable prices of similar properties sold, rental income and a RICS survey. One of the of the main issues that is often of concern to a property investor is if the property will let and what potential maintenance issue could arise. By gaining fixed-term tenancy contract with a Housing Association, investors will be provided with a constant and assured rental income with maintenance borne by the Housing Association.
No, but all investors who wish to be part of a Pi syndicate must have to pass money laundering and ‘Know Your client’ checks. This is a legal requirement when purchasing property in the U.K.
Syndicate members will receive quarterly statements throughout the investment term, detailing the income and any associated expenses.
Druces LLP will provide the legal expertise in handling the acquisition and sale of the property and will undertake all aspects of the legal work in setting up the syndicates and the buying and selling of properties within the syndicates. Upon purchase completion, members’s will issued with share of equity ‘share of title’ as legal proof of their syndicated ownership of the property.
In the unfortunate event a syndicate member dies, their equity share will be passed to their nominated party.
Pi is not regulated by the Financial Conduct Authority (FCA). The benefit of syndicate ownership is that members have direct ownership and control of their asset unlike that of many investments which is done on their behalf on a discretionary basis.
Pi syndicate are not similar to property 'mini-bonds' or P2P investments. PI syndicate afford members direct ownership and control, unlike 'mini-bonds' or P2P property development finance which are debt instruments and aim to provide the investors with a return.
The associated syndicate fees will be clearly detailed for each syndicate but will principally constitute the following:
1) Legal and conveyancing fees: ½%
2) Stamp Duty:
3) Fully property management (if applicable): 15% pcm charged quarterly
4) Pi sourcing fee: 3%
The structure is tax transparent. The companies, as non-trading nominees, have no tax liability and each investor is taxed, if at all, on his or her own share of the income and gain.
Income is distributed without tax deduction (gross) and therefore must be declared by investors to HMRC via their Self-Assessment return. Upon sale, the proceeds are subject to Capital Gains Tax, which once again must be declared via an individual's Self-Assessment return.