Investment Process

Our investment process starts with an assessment of the affordability of the chosen home presented by the prospective tenant and concludes with the negotiation and purchase of the home, taking into consideration a detailed review of the tenant, property and market and ensuring that the investment meets our specific investment criteria and performance requirements.

How We Source Investments

Origination

We aim to source tenants / homebuyers and deals through:

The establishment and nurture of close working relationships with estate agents, property developers and banks, who are usually initial contacts for tenants/homebuyers. Property developers and estate agents will be incentivised by the prospect of a quick cash sale, with the latter also rewarded with fees from the sale. Banks affiliated with us, will be incentivised by the generation of a pipeline of prospective mortgage customers, who will be ready for their mortgage products after our agreement ends.
Social media, affiliate & email marketing, search engine optimisation, internet advertisements, word-of-mouth at industry conferences and seminar attendances, and brand awareness via merchandise.
Direct contact with our online platform by prospective tenants/homebuyers for the following stages:-

Pre-qualification Stage

(a) The prospective tenant/homebuyer provides basic financial information and Preferred Home (or preferred location) details via our platform.

(b) Based on the information provided, our algorithm assesses whether the tenant can afford the Preferred Home (or any homes within the provided location) by calculating the tenant’s affordability ratios and measuring against our threshold criteria.

(c) The tenant is then invited to apply with detailed information if they qualify, or given options of other suitable properties within the vicinity of their chosen location, which fit their financial status.

Application Stage

When the tenant is ready to proceed, they will log in and present detailed information on their finances, address history, employment status and Preferred Home on our platform for underwriting.

How We Evaluate Investments

Pre-Screening

Once we receive the tenant’s application, our algorithm re-calculates the tenant’s affordability ratios and compares them to the threshold criteria to re-confirm eligibility.

In addition, we screen the application against the following criteria, amongst others:

Credit Analysis – does the tenant have strong financials and solid employment history or prospects, i.e. will tenant’s current income levels support household expenditure, rent and monthly principal savings payments?
Property Condition – does the property fall into our Core, Core Plus or Value-Add category, i.e. is it in a good condition with little to no CapEx required?
Sales Price – how does the gross initial yield compare to similar properties in the area?
Location – Is the property in a good location with strong rental yield and capital value prospects?
Demographics – what is the population growth rate, employment rate and wage growth rate in the location? Do the demographics reflect young families or those in household forming and/or prime spending years?

Initial Credit Committee Meeting

After Pre-Screen, we present the investment to a five-member investment committee to test its viability. Once this has been approved, detailed underwriting of the investment is carried out.

Purchase Offer

Following Initial Credit Committee approval, an offer to purchase the property is communicated to the seller’s agent. If the offer is accepted, an Agreement for Lease is signed between SuchHomes and the tenant/homebuyer and the tenant pays the Reservation Deposit to the estate agent to secure the offer.

Underwriting

We thoroughly evaluate the potential investment by carrying out financial, tax, operational, technical and legal due diligence, taking into consideration the following:

The Tenant/Homebuyer

Proof of identity checks (passport, driving license etc.)
UK Residency checks - visa, residency permit or UK passport holders
Proof of address checks - driving license, council tax or utility bills for preceding 3 months, length of tenant’s current and previous leases.
Proof of financial strength and funds - bank statements and credit card statements for preceding 6 months (showing the source, presence and accumulation of deposit amount), credit report confirming solvency and punctuality of payments, evidence of inherited funds in will, receipts of sold shares,
Proof of no rental arrears from current landlord - local council rent card/statement or letter from landlord, if applicable.
Proof of employment - payslips for the last 6 months, letter of employment from employer
Bankruptcy checks carried out by legal counsel.
Financial modelling & analysis of the tenant’s affordability ratio to confirm eligibility.
Risk analysis: tenant credit risk – default probability

The Property

Financial modelling & analysis of the property including market rental value, capital value, entry and exit yield, property expenses, financial statements, discounted cash flow analysis and investment return metrics.
Prospects for long-term rental and capital value appreciation and resale probability in the open market (in case, the tenant/homebuyer decide not to purchase the property).
Market analysis of the region, city/town and local council (including unemployment rates, wage growth, rental and sales availability, take-up and vacancy levels, crime statistics etc.) and comparison analysis of similar assets in and around the local area.
Structural condition (building safety compliance, subsidence, presence of knotweed etc.)
Environmental condition (official flood risk confirmation, check for hazardous material, damp etc.)
Legal Conveyancing (Title searches, check on any legal restrictions or easements, planning history, lease length (if leasehold property), etc.).
Insurance checks (building insurance, chancel repair indemnity (if applicable).
Survey and valuation of the property.
Site inspection of property, neighbourhood and surrounding areas to examine road conditions, access/exit to property, proximity to schools, supermarkets, motorways etc. and to understand the sub market.
Risk analysis: market risk, liquidity risk, replacement cost risk.

The Transaction

Evaluation of deal structure - financial analysis incorporating equity waterfall structure outlining preferred returns and carry.
Working with tax, regulatory and legal experts to define the most scalable and cost-efficient deal structure for all stakeholders interacting with the platform. This is likely to be carried out during the first investment only or unless our property ownership structure changes.
Risk analysis - assess overall portfolio risk to region and deal type.

Final Credit Committee

Following thorough due diligence, we present the investment to a six-member investment committee for final approval to proceed with the investment.

How We Acquire

Acquisition

Once Final Credit Committee approval is secured, the following steps are completed:

All issues raised during due diligence are resolved by the seller to our satisfaction or purchase price reduced by remedial costs.
A final draft of the Modified Lease Agreement between the property-owning SPV and tenant is executed.
A final draft of the Sale & Purchase Agreement between the property-owning SPV and seller is executed.

Final drafts of the Property Management Agreement and Duty of Care Agreement are signed between the property-owning SPV and appointed Property Manager.
The tenant pays Product Fees to SuchHomes.
Capital is called for the acquisition cost (total purchase price of the property and purchase costs) of the property. Upon receipt, an amount, equivalent to the Reservation Deposit of the tenant, is paid from the acquisition cost into a controlled Tenant Deposit Scheme by SuchHomes. The remaining amount is paid to the seller and the third parties involved in the acquisition process.
Tenant moves into property.

How We Finance

Initial investments made during the initial stages of the Fund’s investment period will be financed solely using equity until a favourable interest rate environment for debt application in our investments is possible.

If that opportunity presents itself, we aim for medium-term fixed rate debt, matching our investment horizon and in line with our Core, Core Plus, and Light Value-Add real estate investment strategies, to enhance dividend yield and capital growth.

How We Manage

Asset Management

Once the property has been acquired, we will provide asset management services such as:

Appointing, engaging and conducting business with parties that are necessary to ensure proper performance of our obligations under operating agreements, including but not limited to accountants, legal counsel, valuers, custodians, estate agents, property managers, refurbishment contractors, project monitors, insurers etc.
Monitoring and evaluating the performance of our investments on a quarterly and annual basis against business plan, attending site inspections and providing performance review reports to our investors.
Formulating and overseeing the implementation of strategies for the administration, management, operation, maintenance, enhancement, financing and sale of properties.
Monitoring applicable markets and reviewing reports prepared by industry participants regarding the value of our investments.
Overseeing the property management function to ensure that properties are professionally managed, including;
Routine maintenance and quick response to and resolution of tenant issues.
Punctual & automated rent collection and transfer of monthly principal savings to Tenant Deposit Scheme.
Ensuring adequate insurance, controlled expenses and optimised revenue.
Negotiation and granting of lease extensions, reviewing and approval of any repair and modifications.
Managing debt employed in investments, including punctual and regular servicing of debt, ensuring that financial, informational and other covenants are met and developing and enhancing lender relationships until debt repayment.
Coordinating and managing relationships between us, our tenants, our investors and third parties.

How We Exit

Exit

Our investment exit strategies are:

Purchase of the property by the tenant/homebuyer via a mortgage or cash buy at the earlier of:

the date of the lease break option exercised by the tenant under the terms of the agreement or;
at the end of the Modified Lease Agreement term.

In the event of tenant default and eviction or the tenant decides not to continue with the agreement, exercises the break option and vacates, the property will be held and let at open market rent for the remaining holding period and sold.

How We Pay You

In addition to the return of your capital at the end of each investment period following a Capital Event, our investors will receive;

Dividends from distributable cash flow generated from the properties, which will be deposited directly into investors’ bank accounts on a quarterly basis.
A Preferred Return of 5% per annum on your invested capital on most transactions, taking into account quarterly dividends paid. During periods where the Preferred Return is not achieved, any remaining amounts will be accrued towards subsequent periods until it is paid in full. No performance fee will be paid out to the Fund Manager until all Preferred Returns are paid in full.
80% of net capital value appreciation proceeds, after deduction of proceeds due to the tenant/homebuyer.

Our Fee

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