A specialist property and finance group is looking to raise at least £100million with the launch of the UK’s first property investment fund.
The fund will offer investors the opportunity to invest in residential property by financing first time home buyers (FTBs) and removing their need for a mortgage.
The Investors in Housing Fund, developed by Mill Group with close to £1bn of assets under management, aims to provide consumers with a new way to own and occupy housing. At the same time it overcomes any of the barriers and disadvantages of past residential investment models.
The result, according to the Group, is significantly superior indexed income returns, in addition to the capital gains in what is a proven asset class that has outperformed commercial property, equities and gilts over the past 30 years.
The Fund is projecting a running yield of at least 6% pa as part of a projected return of over 10% IRR over a seven year period on a geared basis after all fees and all at a low risk level.
Home buyers will be asked to purchase five per cent of the property – a deposit amount that is not currently accepted by most mortgage providers as a deposit – and the Investors in Housing Fund will facilitate the purchase of the remaining 95% of the property without a mortgage lender.
Stamp Duty would also not be payable by the home buyer when they buy their initial 5% of the property. In 5 – 7 years the home buyers are expected to buy out the Fund, providing an exit for investors.
The ‘No Mortgage’ concept is one that is readily affordable for first-time buyers, with the buyer only having to pay a monthly co-investment charge, which will be comparable to the cost of servicing mortgages at similar or lower loan to values and designed for buyers who are intending to stay in the property for at least 5 years. This will provide an attractive income receipt to the Fund and drives income distribution to investors.
Mill Group believes that the No Mortgage Co-investment model is particularly suitable for those in higher managerial, professional and administrative careers, who are seeking long-term, secure homeownership and whose income is likely to increase over the medium to long term.
David Toplas, CEO said:
“The deposit requirements for FTBs have reached impossible levels with the average in London exceeding 20%. It’s no wonder they are also on average 37 years old!
“Co-investment aims to bring institutional investment into the market by giving consumers the ability to get onto the housing ladder quicker than saving for these levels of deposit.
“For investors it offers a realistic way of investing in the residential market while earning attractive levels of income and participating in future forecast growth.”
It has been well-documented that there is a lot of frustration at the impact the credit crunch has had on mortgage access in the UK and the demand for prohibitively large deposits that are being sought from traditional mortgage providers - key factors in the lack of movement in the mainstream market.
The Investors in Housing Fund will provide a very simple solution to this stalemate. It is anticipated that interest in the Fund will be significant and Investors seeking to add to their residential portfolio should contact Mill Group.
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