Case Study | Nilesh Rathi
This property consists of two retail shops with an ancillary above, it was purchased at auction for £300,000. Prior to this, Nilesh had spent three years building up a residential portfolio, he had purchased 5 houses at a cost of £1.064 million producing a rental income of £65,628 per annum with a gross yield of 6.2%. After the mortgage interest payments the cash flow consisted of £2,986 per month.
After this, Nilesh met Dan and dived straight into commercial. In just one year, Nilesh had two properties with a purchase price of 0.5 million, a rental income of £49,500 per annum and a gross yield of 10%. After the mortgage was paid, the cash flow each month was £1,820. The commercial mortgage included both interest and capital repayments which de-risks the investment every year as debt is repaid while the majority of residential as a result of the low yields can only afford to pay interest only. This is one of the advantages of commercial over residential, much larger yields that can repay debt. If you would like to find out more about how this is possible join the Community it’s free and you can register below.
Purchase Price: £300,000
Current Value: £387,000
Current Profit: £87,000
Rental Income: £29k-£31k
As stated above this property was bought at auction for £300,000. Nilesh has a mortgage on this property for £196,950, this is at a 65% LTV (Loan To Value), with a 15 year part repayment, at a 5.7% fixed rate for 5 years.
Before Nilesh purchased the property, there were only 18 months left on the lease. However, he went and spoke to the tenants and they were more than happy to sign a new lease with a new landlord.
With this new and improved lease of 10 years, and a modest increase in rent, Nilesh managed to increase the value of the property by £87,000 without doing any renovations or construction. This is simply not possible in residential and is another advantage of commercial that we can add significant value through simple creative asset management strategies. Nilesh also has the option in the future to convert the uppers under permitted development rights into residential though after adding 30% to the value he likes the simple approach best though this value is “baked” into the investment and can be unlocked in the future if required.
Taylor Capital not only seeks to generate income for investors, but our strategies focus on adding value, buying value and cashflow day one with simple strategies that remove the inherent risk with developing.
Nilesh is also now contributing to local regeneration. With just this property, he is helping two local businesses, which creates employment within the local area.
The increase in value and high-quality lease arrangements with long term national brands hugely reduces risk and creates a lowly geared investment that will survive and thrive during the next economic correction.
|Case Study||"Shops ‘N’ Tops Portfolio - Nilesh"|
|Address||180-180A Broadway, Didcot|
|Lease Length||10 years|