What is Stamp Duty Land Tax?

Stamp Duty Land Tax is an amount payable to HM Revenue & Customs on the purchase of property or land in the UK. HM Treasury has recently changed how this tax is calculated.

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Under the old rules, prior to 4th December 2014, stamp duty land tax was paid at a single rate on the entire property price. Now the tax is calculated on a tiered system, with the first £125,000 at 0% and each amount above this charged at the appropriate rate as set out below. For example, a property bought for £275,000 will incur stamp duty of £3,750.

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An additional 3% SDLT is payable on the purchase of additional residential properties (or, in the case of a purchase by a corporate entity like one of our SPVs, all purchases including the first purchase).

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What are Dividends?

Dividends are the amounts paid, on a monthly basis, to all investors in a property. Dividends are calculated as Gross Rent, less deductions for:

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1. Property related costs (including property management, maintenance, and insurance)

2. Estimated likely void periods (i.e. when there are no tenants paying rent)

3. Corporation tax

 

For a leveraged property investment, there will also be a deduction for interest charges, which are tax-deductible. For example, for every £1 of interest, £0.20 is offset against corporation tax (note corporation tax rates are subject to change).

 

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Why are the dividend yields changing?

Every quarter, property managers review the income performance of every property on the platform to ensure that the dividends paid to investors are aligned with the net rental profits generated by the investment.

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Each of the investment properties are held within a Special Purpose Vehicle (SPV), which is a UK limited company. The costs of managing the property and servicing the mortgage are covered by the rental income it generates, and the profit is paid out to shareholders in the form of a monthly dividend.

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Both rental income and operating costs fluctuate over time due to a multitude of factors, and the profits will change accordingly. For example, higher than expected levels of vacancy would reduce rental profit, while increased demand from tenants in a local area could facilitate greater than expected rental increases.

 

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What is the maximum cap?

The maximum number of shares that you can purchase in any property is 199,900 which is equivalent to 19.99% of the SPV. The cap on percentage ownership is to ensure no individual owns a beneficial interest greater than 20%.

 

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What are Resale?

“Resale” opportunities appear on the platform when another Property investor chooses to sell their investment. The selling investor can choose what price to sell at, but we will provide information to help you perform the diligence required to determine whether or not you wish to sell or purchase the investment at that price.

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Each quarter the property manager will provide an updated valuation for each of the properties on our platform. An RICS desktop valuation is published on or about the 5th of January, April, July, and October. If the 5th falls on a weekend or a bank holiday, then the valuation updates will be published on the next business day. A comprehensive Chartered Surveyor’s physical inspection and valuation are completed every five years.

 

However, ultimately it is your decision what price to buy or sell at, our estimated valuations do not constitute, and should not be considered investment advice.

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What are the Fees?

The Account Fee is a monthly charge (£1 +VAT per month) applied to client accounts holding investments or cash. Other fees may apply and vary depending on the property manager we use for your investment. 

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What happens if I don’t have enough money in my account to pay the account fee?

In the event that your account has insufficient funds available to pay the account fee, the account fee shall accrue on a monthly basis and be deducted once you have available funds in your account.

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How do I exit my investment?

You can exit property investments by selling shares on the Resale Market at any time, or via the 5 year exit mechanic.  Please note, we cannot sell shares on behalf of clients. There is no fee to sell shares on the Resale Market.

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Who are property managers?

Property managers are 3rd party platforms used by myresidential to set-up client accounts. It is the client's responsibility to read the terms and conditions of the platforms before they buy a property share.

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Capital at risk

The value of your investment can go down as well as up. 

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Disclaimer

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