Collective ownership

Collective or fractional ownership is not a new concept, but when executed efficiently, remains a very good way for clients to invest manageable sums of money into property ownership.

Here's an illustration of how a collective ownership deal works:

A six bedroom property is purchased for £250,000 with purchasing costs of (say) £12,000 - so total cost £262,000
The purchase is made via a newly created limited company (SPV - special purpose vehicle)
The deposit required to purchase this property @ 75% loan to value (LTV) is £62,500 - the remainder will be lender financed
We (BLOC) act as the facilitator for the purchase and ongoing management of the company (dealing with all third parties for both property rental and company running) and retain ten percent of the ownership.
Five clients all wish to participate in the purchase and each pay £14,900 as an equal share of the deposit and purchasing costs
The five clients then own the remaining 90% of the company shares (18% per client)
To secure income, BLOC installs a supported living contract for a 5+ year period (or longer) worth say £27,000 p/a. That supported living contract results in no management, maintenance or running costs and no void periods.
The mortgage costs are (say) 5% per year against the borrowing of £187,500 (£250,000x75%) - so £9,375 p/a
This leaves a net annual profit of £17,625 before corporation tax, so roughly £14,000 after tax
That £14,000 is then paid out as dividends in proportion to the shareholding - so each client receives £14,000 x 18% = £2520
That dividend payment would represent a return of 17% per annum on each investors investment

Clients have the ability to sell their shareholding after year 2 - initially to the other shareholders (both individually and collectively), or another shareholder can be introduced. There is no limit to the number of times or properties that investors can place funding into, and of course shareholdings to not always have to be equal to one another (though no one shareholder can own more than 49% of any one company).