tiny house investment

[andyhtc]

Singapore's version.

https://www.thebuscollective.com/

https://www.straitstimes.com/singap...ere-to-build-hotels-with-repurposed-materials

https://thesmartlocal.com/read/shipping-container-hotel-one-north/

 

[ahnyaahnya]

Used to be rooms in hotels. Now is tiny homes.
Go ask the people who invested in the first category above

 

[gq.ong88]

As BBCWatcher mentioned a category regarding assisted living, I will appreciate if anyone is able to share their analysis regarding potential pitfalls/risks on the category for assisted living.

https://ereproperty.com/investment-type/assisted-living/

Long story short, I have invested in 2 of these assisted living units in the UK (usually smaller towns like Bradford, Doncaster, Washington (in between Newcastle & Sunderland) since last year.

The tenant is a local housing association in UK, which provides housing for mentally ill people in UK. The housing association gets their income/funding from a department in the UK govt. Essentially they have to use that income to house, feed, rehab, healthcare etc the mentally ill.

So how it works is the developer refurbishes an unused shopping centre, old building etc, converts it to a 30 to 50 units apartment, and sells these units to investors.

The investors then sign a 25years lease (non breakable for tenant, but breakable for investor) for 10% nett yield (ground rent, maintenance, insurance etc are all taken care of by the tenant) so the only deduction is for income tax by UK govt. This rental yield will increase with CPI every FY. If the mentally ill indeed go bonkers and damage the unit, onus is on the tenant/housing association to rectify it.

At the end of 3yrs, the developer may also choose to compulsory acquire the unit to be sold to a instiutional fund at a minimum 30% profit to the investor, and any additional profit to be split 50-50. So e.g. if investor purchase the unit for £100k, at end of 3yrs the developer finds a institutional fund to buyback at say £160k (so investor gets £145k and developer gets £15k). Legal fees both parties pay their own.

If it is not exercised, then simply passive income for the nxt 22years assuming housing association doesnt go bankrupt, UK govt doesnt change policy funding etc. The agent claimed that if housing association does go bankrupt, the Govt will appoint another housing association to take charge and do up a new lease agreement, but subject to negotiations on the new terms. Can sell at anytime upon ownership transfer just like any normal residential asset. At end of 25yrs, you may choose to extend the deal subject to negotiation of terms, or rent in the open market etc.

The house is for either 125yr or 250yr lease depending on the location. It is treated as a normal residential asset class for taxation/stamp duty purpose.

This is a full cash deal/no loan of about £150k to £200k per unit. Caveat that a unit of similar age, size, location is easily only 30 to 40% of the cost that I am paying for. But of course the market rent is also nowhere close to what I am getting. How I see it is everyone from the developer, agent, housing association, investor and even the mentally ill patients are milking off the generous funding from the UK govt for all to benefit in one form or another.

Have received my rental consistently for the past half year on the 1st of every mth, the agent also updates from time to time regarding potential buyout of the units. Other than the fact I am paying 2 to 3x the typical price for a unit in that area, and there is no promise the housing association can stay solvent if they misappropriate the money or funding is cut by UK govt, any other potential risks that I may have inadvertantly missed out? Pls skip the fx risk, or issues like the unit is so far away the tenant destroy your house, do drugs at your place you also donno, housing association play hardball refuse to pay up and ignore you, troublesome to engage lawyer to sue them for damages etc

Here are some other "nontraditional" forms of housing that may or may not be available for direct investment:

• dormitories (we have many in Singapore)
• corporate housing such as serviced apartments
• worksite trailers
• film/TV location trailers
• oil & gas exploration/drilling site housing
• cruise ships
• hotels, including capsule hotels and airport transit hotels
• corporate and religious retreat housing
• hostels
• assisted living/eldercare housing
• student housing
• disaster relief housing
• RVs, camper vans, and other wheeled homes
• campsites (such as RV plug-in camps)
• mobile home parks
• drug treatment housing
• housing for victims of sexual assault, spousal abuse, etc.
• correctional facilities
• mental health patient housing
• family housing near children's hospitals
• privately owned rail carriages
• house boats

All involve substantial risk.

 

[ctan84]

This is a full cash deal/no loan of about £150k to £200k per unit. Caveat that a unit of similar age, size, location is easily only 30 to 40% of the cost that I am paying for. But of course the market rent is also nowhere close to what I am getting. How I see it is everyone from the developer, agent, housing association, investor and even the mentally ill patients are milking off the generous funding from the UK govt for all to benefit in one form or another.

Have received my rental consistently for the past half year on the 1st of every mth, the agent also updates from time to time regarding potential buyout of the units. Other than the fact I am paying 2 to 3x the typical price for a unit in that area, and there is no promise the housing association can stay solvent if they misappropriate the money or funding is cut by UK govt, any other potential risks that I may have inadvertantly missed out? Pls skip the fx risk, or issues like the unit is so far away the tenant destroy your house, do drugs at your place you also donno, housing association play hardball refuse to pay up and ignore you, troublesome to engage lawyer to sue them for damages etc

These 2 paragraphs pretty much tell me its a pretty bad deal. Unless your rental is 10%, I think the money is much better being in SG Reits which can safely still net you 6.5-7%.

 

[yoongf]

So how it works is the developer refurbishes an unused shopping centre, old building etc, converts it to a 30 to 50 units apartment, and sells these units to investors.

U hv strata titles for the "units" u hv bought?

If not, what document do u hv to determine ownership

 

[CrashWire]

The investors then sign a 25years lease (non breakable for tenant, but breakable for investor) for 10% nett yield (ground rent, maintenance, insurance etc are all taken care of by the tenant) so the only deduction is for income tax by UK govt. This rental yield will increase with CPI every FY. If the mentally ill indeed go bonkers and damage the unit, onus is on the tenant/housing association to rectify it.

This is a full cash deal/no loan of about £150k to £200k per unit. Caveat that a unit of similar age, size, location is easily only 30 to 40% of the cost that I am paying for. But of course the market rent is also nowhere close to what I am getting. How I see it is everyone from the developer, agent, housing association, investor and even the mentally ill patients are milking off the generous funding from the UK govt for all to benefit in one form or another.

Have received my rental consistently for the past half year on the 1st of every mth, the agent also updates from time to time regarding potential buyout of the units. Other than the fact I am paying 2 to 3x the typical price for a unit in that area, and there is no promise the housing association can stay solvent if they misappropriate the money or funding is cut by UK govt, any other potential risks that I may have inadvertantly missed out?

What happens if you want to exit at the end of 25 years? If you sell, would it be at a 60% loss since you're massively overpaying for ownership?

 

[gq.ong88]

What happens if you want to exit at the end of 25 years? If you sell, would it be at a 60% loss since you're massively overpaying for ownership?

Just sell like a normal property. Appoint an agent, solicitor etc.

Not sure any loss but say if I sell at 50% discount, that will mean a 20% ROI for the next investor. I have a feeling the current investors will be unwilling to let go at such a loss/such a high ROI for the next investor, and the next investor will probably think if it is so good, something must be wrong/is a scam.

Even at 10% ROI, is super high at double/tripe of US treasury bonds/SGS notes. Our local properties are returning 2% nett yield currently.

 

[gq.ong88]

U hv strata titles for the "units" u hv bought?

If not, what document do u hv to determine ownership

Yes, I signed 3 documents

1) between investor n developer to transfer the title of the unit from developer to investor,

2) between investor and housing association for them to pay 10% rental yield for 25years and take care of insurance, ground rent, inspection fees etc,

3) between investor and developer for developer to have the right to compulsory acquire back within 3years at a min of 30% profit to investor and subsequent profit to be equally shared.

The ownership got to wait abt half a yr, then check online with the UK "SLA equivalent. Shld be smthg similar to our INLIS system.

 

[gq.ong88]

These 2 paragraphs pretty much tell me its a pretty bad deal. Unless your rental is 10%, I think the money is much better being in SG Reits which can safely still net you 6.5-7%.

My rental is 10%. I paid about £170+k full cash late last year. So far, on the dot 1st of every month, they pay me the 10% into my UK bank account.

Yup, the worry of course is the housing association (which is a registered charity in UK) goes bankrupt, run away with funds, the mentally ill people refuse to vacate the unit and the UK govt does not bother to follow up for another charity to step in to payout the rent etc. Stuck with no rent and and overpriced asset that I have to sell at maybe 30% of what I paid.

 

[CrashWire]

Not sure any loss but say if I sell at 50% discount, that will mean a 20% ROI for the next investor. I have a feeling the current investors will be unwilling to let go at such a loss/such a high ROI for the next investor, and the next investor will probably think if it is so good, something must be wrong/is a scam.

So the answer is still "very likely"?

But at 10% net yield, you should get back your principal in around 10-11 years? (Not counting opportunity costs and inflation.)

 

[gq.ong88]

So the answer is still "very likely"?

But at 10% net yield, you should get back your principal in around 10-11 years? (Not counting opportunity costs and inflation.)

Well how the developer "value" the property is to say lets assume £1000 rental per mth, so thats £12,000 per yr. And they then peg it to a yield which they think investors are willing to invest. In this case 10% and therefore, £120,000 is the "value" of the property.

Since it is a full cash deal, i just treat it as a 25year bond that yields 10% every yr. Just so long is not a Credit Suisse bond. Even if at end of 25yrs, the rental is reduced to the market rate and consequently affects the true value of the property, I would have gotten back my principal and get some profits over the years.

I suppose the concern here is that this sounds like a hot air balloon? Paying more and more for the property because of the promise high rental returns? Or would anyone give this a try or totally steer clear of it?

 

[BBCWatcher]

There's also some GBP-SGD exchange rate risk if you're an investor operating from a real lifestyle in Singapore orientation.

 

[Dunkdapunk]

As an investor in a tiny home, I’ll give you my feedback so far.

I bought one in Australia (I’m based in Singapore) for S$120k. TBH it doesn’t matter where it’s located as it’s purely an investment. As I understand it, TH only need to rent it out 5 days a month to cover my repayment and they spread that risk across all of their tiny homes across Oz. So I’m comfortable with the risk. So far they have paid every month for the last 18 months of the investment. It’s 10% ($1000 pm) and tax free and I have no other outgoings or costs typically associated with property investment. I don’t event think of it as a property investment. So far so good and I’m happy with the investment. Will update you if it goes sour!

 

[sohguanh]

As an investor in a tiny home, I’ll give you my feedback so far.

I bought one in Australia (I’m based in Singapore) for S$120k. TBH it doesn’t matter where it’s located as it’s purely an investment. As I understand it, TH only need to rent it out 5 days a month to cover my repayment and they spread that risk across all of their tiny homes across Oz. So I’m comfortable with the risk. So far they have paid every month for the last 18 months of the investment. It’s 10% ($1000 pm) and tax free and I have no other outgoings or costs typically associated with property investment. I don’t event think of it as a property investment. So far so good and I’m happy with the investment. Will update you if it goes sour!

Can I know you prepared for worst case scenario and that is 120k gone before you go in correct? 120k to some are quite a lot despite the English word tiny house.

 

[andyhtc]

Highly risky. Not investment.

 

[JuniorLion]

Castlewood Group also paid their "investors" for at least 12-18 months before they went radio silence.

 

[JuniorLion]

Did you also invest in Tiny House?

 

[BBCWatcher]

It’s 10% ($1000 pm) and tax free....

How would this income be tax free? The Australian Tax Office says property rental income is taxable. Or the income is structured as dividends, but then the dividends would be taxed in Australia.

I might believe that you're receiving (so far) $1,000 per month net of taxes (after tax), but after tax isn't the same as tax free.