A new British startup is offering Gulf investors the chance to become instant residential landlords in the UK, starting with the northern cities of Manchester and Liverpool.

Through an online platform, Dot Residential sets up limited companies to own homes, allowing casual international investors to easily build a property portfolio. The company was founded in April and has processed 30 transactions so far. Around a third of the firm’s buyers hail from the Middle East, and this is not by idle chance; Gray Stern, co-founder and CEO of Dot, has said that he is specifically looking to target Gulf investors.

Dot bulk-buys properties from developers at a discount and furnishes them to a “boutique hotel” standard. After choosing the desired property, the landlord must pay for the interior design and furnishings upfront.

In addition, Dot takes out buildings, contents and rent guarantee insurance for clients. After these expenses, the investor receives monthly rent from the property, minus management fees and interest paid on the Dot mortgage.

“We offer a marketplace of high-quality property investments,” Stern said. “We package investments so it’s easy for customers; we offer everything in one solution, including vetted properties, finance deals, property management and interiors.”

Dot Residential has also launched a “Revive to Rent” (RtR) option, which Stern says holds value for Gulf investors especially. Through this model, investors can put up capital to renovate old buildings and generate additional “upside” from renovation work as well as taking out the base level mortgage.

“A lot of the property currently being sold in the Gulf is new,” he said, “and oftentimes the same projects are represented by multiple distributors into that region. Gulf investors tend to see the same stuff over and over again. […] With RtR, we’re providing secondary access to the UK property market, which has far better value, particularly by square foot cost.”

Twenty properties have been bought so far in Manchester and Liverpool, with $3 million in seed funding, mainly from US investors. Dot plans to roll out more offices in Leeds and Birmingham before establishing a new office in Dubai in 2020 to focus on the regional market.

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Gray Stern, co-founder and CEO of Dot Residential

BREXIT SHIFTS PROPERTY INTEREST TO THE NORTH 

A recent report from global property firm Savills states that for the US dollar buyer there has been, on average, an effective downward price adjustment of 40 percent compared to five years ago. Henry Faun, a partner and the head of London International Project Sales at Knight Frank Middle East, has noted major Gulf demand for residential property in both Manchester and London since the pound lowered against US-dollar-pegged currencies.

“Both expatriates and GCC nationals have made the most of the attractive purchasing opportunity,” he said. “The UK remains the destination of choice for GCC nationals looking to diversify their property investments abroad or for a second home.”

Stern said that Gulf property purchasing across the UK has “cooled over the last few weeks” as investors grapple with the political uncertainty surrounding Brexit, but the UK’s northern cities continue to see high Gulf interest, against the odds.

MANCHESTER RISING

“The London markets are stagnating or falling, depending on the data you look at,” Stern said. “But in markets in the North West and the Midlands, for the same cost of an apartment in central London, you could get three or four apartments generating twice the rental income and incur half the stamp duty.”

Louise Emmott, head of JLL UK, a North West England residential agency, told Zawya that Manchester’s residential market in particular is buoyant. “Demand remains high, and our office saw a 117 percent increase in people moving into Manchester in July of this year. Liverpool is becoming similarly in-demand, although not at quite the same rate that Manchester is.” 

Emmott said that both cities benefit from affordable property prices, vibrant business communities, good transport links and excellent entertainment economies. Manchester is now seeing a steady hike in prices, and JLL’s growth forecast predicts that Manchester property prices will increase by 16.5 percent between 2019 and 2023.

In addition to the northern UK cities of Leeds and Birmingham, Dot plans to expand out to US cities such as Austin and Denver, which are also attracting Millennials priced out of big cities.

Following its Gulf launch in early 2020, the firm will be seeking Series A funding to expand globally.

(Writing by Alicia Buller, editing by Seban Scaria seban.scaria@refinitiv.com)

© ZAWYA 2019