New fund to allow UK investors access to Britain’s buy-to-let market

17th November 2014

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Investors who wish to gain exposure to the buy-to-let market without taking on the full cost of a property have a new opportunity to do so via the Mill Residential Real Estate Investment Trust (REIT).

The Mill Residential REIT is managed by the property investment group Mill Group Residential, and holds a portfolio of residential properties and as a REIT would pay no tax on its core rental income or capital gains.

Retail investors can access the company via the crowdfunding platform SyndicateRoom and the minimum investment is £1,000. Mill Group intends to list the REIT on a UK stock exchange, after which the shares will be tradable. The REIT is launching with seed capital invested or committed from its managers of circa £2m and is making an initial £300,000 of equity available via SyndicateRoom.

To qualify as a REIT, the company will distribute at least 90% of its profits from its rental business to its shareholders in the form of dividends. Dividends have tax advantages for investors who hold their REIT shares in an ISA or Self-invested Personal Pension (SIPP).

REITs first appeared in the UK in 2007 as a tax efficient investment for those seeking to gain a broad exposure to the property market without the cost and hassle of owning property directly.

Previous UK REITs have mainly focused on commercial property, but Mill Residential REIT is the first to invest exclusively in the mainstream residential sector. According to Mill Group, its initial portfolio is almost fully let and generating income, and consists of properties located in the REIT’s initial target locations of London, Southern England and the Midlands. The properties in which it is invested range in value from £180,000 to £430,000.

David Toplas, chief executive of Mill Group Residential said: “With house prices disappearing out of reach for would-be buyers in several parts of the country and mortgage rates expected to rise in 2015, rental demand – and landlords’ incomes – are going from strength to strength.

“Mill Residential REIT will add further value to its portfolio through development and refurbishment, and offer its shareholders a tax efficient, affordable and, when listed,  more liquid alternative to owning a self-managed, buy-to-let property.”

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