Case Study | Derek McGroaty
Derek McGroarty has had some experience in residential flips, buy to lets and he also has an overseas holiday let. Derek had no prior commercial property experience before meeting Dan. This property was slightly ‘messy’ before Derek purchased as it was in administration and offers were invited over £250,000. Derek, secured his first commercial asset, a parade of 4 shops “n” uppers with 4 immediate income streams and multiple opportunities for adding value in the short and mid term for £250,000.
The aim of this project was to buy the property through Derek’s SSAS business pension as this is a very tax efficient way to invest. If you would like to find out more about how this is possible join the Community it’s free.
Purchase Price: £250,000
Current Value: £300,000
Current Profit: £50,000
Rental Income: £30,000
We always like to add value immediately by buying value and this property immediately attracted our attention as the property was in administration, enjoyed multiple occupiers being a parade of “shops n tops”. Offers were being sought for offers over £250,000 by the agents acting on behalf of the administrators.
Derek was successful with his offer and he completed the purchase on 14th Feb 2020, mere months after Derek joined the Club.
We also look for properties that after buying value we can further add value in very simple ways and with the least amount of hassle or risk.
The initial value add was to create new standardised leases with an ability to include both a service charge and a management fee provision. This allows the property to be maintained in a good state of repair and the landlord to be paid for his managing services provision alongside the rentals adding further to rental profits.
Secondly the rear extension will be brought back into the landlord’s control and will be split into two further units bringing the tenant mix to 6 and the yield from a starting 12% to 15%, not a bad start.
There is a third “value add” strategy that will be implemented within this property and that should take the yield up to 20% and will be actioned in Q4 2020 or Q1 2021 latest. Again, this is a very low risk strategy providing self storage to the rear of the property with minimal risk and significant returns.
This transaction created multiple immediate income streams day one and will receive tax free income for decades to come, provide income for Derek’s retirement and provide a legacy for his family.
Taylor Capital not only seeks to generate income for investors, but our strategies focus on the reciprocal effects of regeneration and re-profiling of the town centre on and the positive effects on local communities.
Derek now also contributes to local regeneration as he is now the landlord to four local businesses, these businesses create jobs within the local community, which in turn, adds value to the area.
The increase in value and high-quality lease arrangements hugely reduces risk and creates a lowly geared investment that will survive and thrive during the next economic correction.
|Case Study||"SSAS Funded 2 - Derek"|
|Address||Bedlington Parade, Northumberland|
|Lease Length||3-25 years|
Derek applied Taylor Capital's trusted strategies to upgrade the asset and added considerable value, generating £50k in profit and inserting multiple national high street brands as tenants on lease terms of 3 - 25 years creating a long term collective annual income of £30k.
|Tenants||Rent per year||Lease||Break Clause|
|Accountants||£11,000||15 years||No Breaks|
|Cake Shop||£5,300||10 years||Break at 2021|
|Barbers||£4,800||25 years||No Breaks|
|Hairdressers||£5,808||3 years||Break at 2019|
Project Plans & Gallery
Derek McGroarty acquired the property, which was in administration, for £250k. The project aim was to transform the building into a profitable mixed-use space to be occupied by a small selection of businesses. If you would like to find out more about how this is possible, join the Community it’s Free.
Before: Property in administration, taking offers from £250k
Now: Transformed Using Strategies to Create a Four Income Streams
Before: Before Reconstruction
During: During Reconstruction
Transformed: Transformed After Taylor Capital Reconstruction