Imagine Homes 'Buy-already-Let' scheme

master_ian

Does anyone know anything or have experience of buying from Imagine Homes 'buy-already-let' scheme?
They buy new build properties at a discount from developers, then sell them on as individual units. However at completion, the buyer agrees to rent out the property BACK to Imagine Homes, who find tenants and manage it for 2 years. The buyer receives 7.5% rental income for year 1 UPFRONT after completion, and again 7.5% rental income at the start of year 2 (regardless of any void weeks that may occur during the 2 years of the tenacy). So, as the sales pitch goes, thats 2 years of a guaranteed rental income of 15%.

As a first-time buyer looking to get into buy-to-let, any advice on this? Their site is: http://www.imaginehomes.co.uk/index.html

Tell me what you all think!

Cheers.

Alan_M_2

Being a cynic, the only way I can see these people making money is if they're selling you the property at an overvalued rate to start with (i.e. the 15% rental income for the first 24 months has already been factored into the sale price - and some). Otherwise it simply makes no financial sense.

They've effectively bought the risk from the developers in bulk at a discounted rate, the developer guarantees a fixed income for the development in return for good cash flow.

All this costs money, in administration, interest etc, there's only one person that ultimately pays for all that..the end buyer.

Don't dismiss it, but walk in with your eyes wide open.

silvercar

7.5% at the start of year 1 and the start of year 2 equals a return of 7.5% each year not 15%!

If all the flats on the site are rented there is the risk, with no owner-occupiers that the place will look tired quicker. Consider what to do after 2 years, most flats will continue to be rented. Some will be sold, probably at less than the inflated new price and a very few will have the original owners move in. Still not many owners compared to renters.

lynzpower

I dont know which these flats are, but after 2 years, SOME new build folats look very tired internally indeed, and probably need at least full redecoration.

Mine did.

Alan_M_2

silvercar wrote:

7.5% at the start of year 1 and the start of year 2 equals a return of 7.5% each year not 15%!

If all the flats on the site are rented there is the risk, with no owner-occupiers that the place will look tired quicker. Consider what to do after 2 years, most flats will continue to be rented. Some will be sold, probably at less than the inflated new price and a very few will have the original owners move in. Still not many owners compared to renters.

However it is 15% of the initial purchase price when considered as a lump sum you'll agree, which is what the OP was getting at.

Doozergirl

I agree with Alan M. From what I've seen of these schemes, you're paying that guaranteed rental income yourself in the purchase price.

Also, work out what the monthly rent is on that 7.5% and whether it is actually the going rate for the area - check with letting agents, not the developer!

Personally, I think New Build BTL is a bad idea.

silvercar

Alan_M wrote:

However it is 15% of the initial purchase price when considered as a lump sum you'll agree, which is what the OP was getting at.

It may well be, but you'll have your mortgage to pay at 5%+ in the first year and in the second, with no further income above the two lots of 7.5% that you have, in your mind, deducted against the purchase price.

master_ian

Cheers for the replies...

Here's another catch guys...I'd have to BUY the whole furniture pack from the company which is designed by the CEO's wife Anthea Turner! I've checked the separate website for the goods http://www.imaginefurnishings.biz/

They seem good quality but quite pricey -- a 1-bed fully furnish will cost 7K
and a 2-bed will cost 9K (all incl). Mmmm. Clever idea, dont you think!

As for factoring in the rental income into the purchase price...that's where price negotiation/reduction would come into play. Negotiating a discount off the price (I will be looking at other developers directly and comparing deals) would offset this.

It just seems a good idea on the whole- guaranteed income for 2 years and management of the property. However, this is only one of my options- I'll be looking at other new build or relatively new properties in good condition.