Have you ever thought about buying a home but are not sure whether it is worth splashing the cash?
Perhaps there are worries over unruly neighbours, bad traffic or the property simply not being the right fit.
One new online platform is hoping to change all that by allowing prospective buyers to stay in a home listed for sale before they hand over a hefty deposit and go through with the purchase.
Potential Pads, based in Wales, allows interested buyers to try out their future home for a night, week or even a month before taking the plunge, much like test driving a car.
One of the homes where the owner is willing to let people try before they buy on Potential Pads
Currently, many of the homes on the website are mansions worth millions.
When forking out such a large amount of money, it could be handy for potential buyers to get a taste for the place first.
It works by letting the potential buyer and seller communicate easily to facilitate a try before you buy scenario, with the website operating similarly to AirBnB.
According to the firm, the idea is to allow those staying to not only get a feel for the property itself but also the local area, schools and potential commute.
Although the company is for properties worldwide, currently on the website, there are only five properties up for sale, four of which are based in England.
Most are on the luxury end, with one valued at £22million, one £6million and another for £8million.
This suggests that the site will be used primarily for more expensive properties where prospective buyers can make sure they are happy to splash the cash, although there is one home listed for a smaller sum of £600,000.
One of the properties advertised, listed for £22million, is based near Knutsford, Cheshire, is currently looking for potential buyers to spend £4,500 a night on a trial fee – a sizable sum.
However, those who then decide to buy the property after staying will get 50 per cent of that amount back via the websites incentive scheme – which the seller can choose to include or not.
There are no properties currently available for renting on the site, while it remains to be seen if homes valued at closer to national average will appear in the next year.
Cost: Potential Pads take a 15% fee from the total amount the potential buyers pay to stay
Lynne Maplanka, founder and director of Potential Pads, came up with the idea after working in a local hotel.
She said: ‘I began to notice a pattern of people checking in for a couple of days just to view properties in the hope of relocating.
‘Most guests made the viewing trips at least twice and still did not settle on a property.
‘They mentioned that the viewings felt rushed and that they felt they had to cram as many viewings as they could in one trip.
‘I thought to myself, “If home buyers can pay to stay in a hotel, why wouldn’t they pay to test drive their future home?”’
So far, the firm has seen 82 trials arranged through Potential Pads, most of which have been private clients.
However, these clients were part of a free trial period to see how viable the business concept could be worldwide.
Over half of the properties sold within the trial period were bought by customers who had trialed them via Potential Pads before committing to the purchase, suggesting the concept could work.
This is Money decided to take a more in depth look into how Potential Pads works for both buyers and sellers.
How does it work for sellers?
Sellers can register an account with Potential Pads for free using their personal email or Facebook account.
Once registered, they can upload the property they are looking to sell onto the platform for free.
It is then up to the seller to decide how much they wish to charge for the trial price per night – Potential Pads recommends that the seller sets a trial fee that will reflect the value of their property.
The seller also has control of the dates available for the trial, whether that means letting out their entire property or just a room in their home on a bed and breakfast basis.
It is their responsibility to make sure that all the information they provide about their property is accurate to their knowledge.
They must also ensure they speak to their current insurance provider to request an upgrade to cover them for short lets or B&B purposes.
The £22million home that is currently being advertised on the Property Pads website
The site also comes equipped with an incentive button which allows sellers to set the percentage of the amount they are willing to return to the buyer if they commit to buy.
This is aside from a 15 per cent fee that Potential Pads take from the trial figure paid.
The incentive button is designed to give the buyer motivation to try a home out, knowing that they will get money back once they commit to buy.
There is also a a verification option on the site, which although optional, is recommended.
The site requires a government approved photo ID to be uploaded on the profile as well as a profile image of the individual on the ID.
Potential Pads stresses that it does not take a fee or commission for the sale of the property.
Maplanka added: ‘Potential Pads is an added feature to help sell the property in this changing market. It is not an estate agency but a tool that can be used by estate agencies worldwide.
‘It is a platform that helps weed out the time wasters and is an incentive that speeds up the selling process of a property, all the while making money for the seller before the property has to be sold.’
How does it work for buyers?
Buyers register the same way as sellers. Once they are signed up, they can browse through properties and make a booking for their trial.
Potential buyers choose the property they like, select the dates they wish to stay as well as their length of stay and then make a payment online.
Potential Pads keep the funds until the buyer checks into their trial pad. The firm releases the funds to the seller 24 hours after check in and after it has taken its 15 per cent fee.
Some sellers may require a deposit and a cancellation fee may apply in case buyers fail to leave the property in the same condition as they found it in.
Buyers can message sellers on the platform and it is advised that they keep all communication on the platform so there is a digital trail should anything go wrong.
Maplanka said: ‘We try on a dress before we buy it, test drive a car and even get to sample wine before purchasing the whole bottle at a restaurant.
‘So, why not try before you buy that future property as most individuals will be parting with a lot of money?
‘This concept may not be ideal for everyone but we hope that it will be the future of buying and selling property.’
Is your fund manager gambling your cash on companies he doesn’t understand?
Shake-up: Kartik Kumar, manager of investment trust Artemis Alpha
Over the years, I’ve spoken to hundreds of investment managers and quizzed them about the funds and investment trusts they run.
For the most part, it’s been both enjoyable and educational. Most have been pleasant, some impressively eloquent, a few ferociously intelligent.
But some have been either downright arrogant or seriously underwhelming – more like Tom Hanks’ self-regarding financier in the hit film The Bonfire Of The Vanities where he sees himself as one of the ‘masters of the universe’.
Their views have formed the basis for many an informative article – and along the way helped readers enhance their wealth (that’s what we’re here to do).
Yet these conversations with some of the leading investment experts in the country are not always easy. Invariably, it’s not just them I am interviewing because they usually come with their own marketing people and public relations advisers in tow, or patched into the phone call. People with corporate agendas to pursue – namely to ensure that the fund manager and investment house come across in the best possible light.
As soon as the manager goes a little off-piste by saying something controversial – maybe about a rival manager, the funds industry, or the heady state of the stock market – they are instantly reined in and the conversation suddenly either stops or goes ‘off the record’ (I can’t report it).
At the end of the day, investment management groups are in business to make profits for themselves. That means an emphasis on sales and marketing – not on necessarily telling the total truth.
But sometimes, this gloss does not get painted. An investment manager comes along who is prepared to speak his mind. It’s wonderfully refreshing when it happens – as it did last week when I was given the opportunity to speak to Kartik Kumar, lead manager of an investment trust called Artemis Alpha.
In a nutshell, his view is that most mainstream investment houses – none more so than his own – should stick to what they are good at, which is running equity portfolios on behalf of investors.
They should not be dabbling in specialist investment areas such as unquoted companies that are more complicated to analyse and require an altogether different skill set. These specialisms, he said, should be left to investment houses set up to invest specifically in private equity.
He said: ‘At the end of the day, Artemis has built a reputation for being an equity investor. That’s what it should do and how it should move forward.’
Fund boss Kartik Kumar is very different from ‘masters of the universe’ in the hit film starring Tom Hanks, Melanie Griffiths and Bruce Willis (pictured)
Kumar has just spent the past 20 months unravelling a big unquoted position in Artemis Alpha that he inherited when he was asked to manage the trust in April 2018. A holding at odds with everything Artemis stands for.
His thoughts are apposite because they come as investment house Schroders gets to grips with sorting out the mess that was Woodford Patient Capital.
This is an investment trust that was launched by Neil Woodford in June 2015 to provide funding for early-stage companies, most based in the UK and unquoted (private businesses, rather than public and listed on the UK stock market).
At the time, all rather meritorious and enthusiastically welcomed by investors. Some £800million poured into the trust, making it the biggest ever launch of an investment trust (since usurped by Terry Smith’s Smithson Investment Trust that raised £822million).
But today, Patient Capital’s share price is a third of what it was it at launch, it’s got a new name (Schroder UK Public Private) and Woodford is nowhere near it. Woodford failed quite spectacularly. Why? Because for all his success at Invesco in the 2000s, he didn’t have the skill set to manage a portfolio of unquoted investments.
As Katie Potts, veteran manager of Herald Investment Trust, told me last week in between meetings in New York, running an unquoted portfolio is ‘a completely different proposition’ to managing a fund investing in companies listed on the stock market. She said: ‘With shares, the market determines the price you can buy and sell them at and the skill is buying low and then selling high.
‘But with an investment in an unquoted company, it’s about assessing how much to invest and at what price, then closely managing the investment on an ongoing basis without having a share price to follow, and understanding that you can’t necessarily get out when you want to. This all requires tremendous resource.’
For the record, the £1billion Herald invests in smaller quoted companies – it doesn’t dabble in unquoteds. Woodford Patient Capital, she said, was more about ‘marketing a brand’ than providing investors with access to investment expertise in unquoted companies. In other words, it was doomed from the word go. Back to 29-year-old Kumar who joined Artemis eight years ago – an investment house with £28billion of assets under management whose strapline is the ‘profit hunter’.
The trust’s exposure to large cap stocks – like Sports Direct, Tesco and Barclays – has tripled
Last week, I had a long chat with him about his key role in overhauling the portfolio of Artemis Alpha, a £135million investment trust primarily invested in the UK stock market. A reconstruction that has resulted in the trust disposing of most of its unquoted holdings – down from a quarter of assets in April 2018 to 7.5 per cent today. This percentage will come down further as a ‘tail’ of unwanted unquoted holdings is disposed of. He’s a confident young man, keen on doing his own research into companies, and probably destined to go far in fund management.
Eton educated Kumar was asked to undertake the strategic review in early 2018. This followed a period of sustained underperformance for the trust against its peers and its benchmark, the FTSE All-Share Index. In the five years to April 2018, Alpha Trust’s share price had risen by just under 10 per cent, compared to an increase in its benchmark of nearly 38 per cent.
The trusts that can be worth risk
There are 20 stock market-listed investment trusts currently set up to invest in unquoted companies. Falling under the collective label of ‘private equity’, key details on all 20 can be found on the website of the Association of Investment Companies at: theaic.co.uk.
Moira O’Neill, head of personal finance at Interactive Investor, says such trusts ‘remain the best way for investors who want to access the higher risk, higher reward world of unquoteds’. She adds: ‘Private equity managers will often take a seat at the board table of the companies they invest in. This is active management at its most hands on.’
One trust she likes is Pantheon International that invests in a mix of unquoted companies and funds run by other private equity specialists. ‘With a global portfolio,’ she says, ‘it gives exposure to some of the best private equity managers in the world’.
It’s also a trust liked by Jason Hollands of wealth manager Tilney who also recommends Oakley Capital and BMO Private Equity.
An alternative approach, says AJ Bell’s Laura Suter, is to invest in the country’s biggest investment trust, Scottish Mortgage. Part of the FTSE100 Index, this £8.7billion trust – managed by Baillie Gifford – has some 21 per cent of its assets in unlisted companies.
London Stock Exchange identification numbers: Oakley Capital (B23DL39) Pantheon International (0414850); Scottish Mortgage (BLDYK61).
Kumar was not backward in coming forward. He proposed that the trust’s portfolio be revamped – with the number of individual company holdings reduced. He also stated the trust should be less focused on smaller companies and unquoteds, while having the opportunity to invest some of its assets overseas. His reward for being so bold was to be appointed co-manager of the trust and implement the strategy he had recommended.
‘Artemis is renowned for being an equity investor,’ he told me. ‘Artemis Alpha didn’t properly reflect that expertise. It had gone too far with its illiquid, unquoted holdings. Indeed, outside of the trust, Artemis had no exposure to unquoteds, so it made sense to reduce the holdings.
‘The result is a portfolio that is far more liquid, making it easier for me to make portfolio changes. It is also more diversified in terms of its exposure across the market, embracing large and mid-cap stocks as well as smaller companies.’
Today, the trust has 44 holdings instead of the 86 it had in April 2018, while its exposure to large cap stocks – the likes of Sports Direct, Tesco and Barclays – has tripled.
The biggest overseas holding is German food delivery company Delivery Hero, a top ten position. He now runs the trust with oversight from John Dodd, one of Artemis’s four founding partners and a big personal investor in the fund.
Reducing the unquoted holdings, said Kumar, involved some ‘tough medicine’, resulting in the value of the trust’s assets taking a big hit in 2018. But the medicine seems to have worked. In the past year, the trust has outperformed both the FTSE All-Share Index and the average return recorded by its immediate peer group. He is confident the trust’s future is a lot brighter than it was some three years ago.
A few days ago, broker Numis issued an interesting paper on the lessons to be learnt from the collapse of brand Woodford. Among the many points it made was one on the vast resources required to run effective portfolios investing in unquoted companies.
It said: ‘Investing in unquoted businesses is more complicated than quoted equities and requires significant resources for due diligence, transaction execution and monitoring.’ Exactly the point Herald’s Potts made in her phone call from New York.
Woodford didn’t have the required resources although he never once let on. It remains to be seen whether Schroders (and its private equity subsidiary Adveq) can now resurrect the fortunes of UK Public Private (Patient Capital).
Artemis doesn’t either which is exactly why Kumar has taken the steps he has with Artemis Alpha. It is now what it should have been all along – a profit hunter.
TONY HETHERINGTON: I smell a rat in this tale of a criminal tenant
Tony Hetherington is Financial Mail on Sunday’s ace investigator, fighting readers corners, revealing the truth that lies behind closed doors and winning victories for those who have been left out-of-pocket. Find out how to contact him below.
Ms L.F. writes: To supplement my pension, I decided to rent out my late mother’s house. I chose Howards Estate Agents to find a suitable tenant in full time employment, but it later became apparent they were not and defaulted on the rent.
Howards used a separate firm called Letsure to make checks, and it had accepted a single email as proof of the tenant’s employment. He had breached two suspended prison sentences, was convicted of drug offences, and was under a three-month curfew when he and his partner moved in. However, the Property Ombudsman says Howards has no responsibility for Letsure, and Letsure will not communicate with me as its contract is with Howards. Tenancy references in these circumstances are meaningless.
Our reader had issues with a tenant, who claimed to be working as a pest controller
Your complaints against Howards, and the Ombudsman’s enquiries, went on for a long time, but the crucial period is in the summer of 2014 when you were looking for tenants for the property near Norwich, in Norfolk.
Howards asked the Letsure checking agency to look into the would-be tenants, and Letsure recommended their acceptance. The couple were not on any public record such as the electoral register at their existing address, but they explained they were staying with friends.
The crucial information from Letsure was that the man was in full time work as a pest controller, earning £35,000 a year. This was odd. You see, almost three months earlier, in June 2014, the same man was arrested at his then home when police found he was growing cannabis plants under heat lamps in his garage.
When he appeared in court, he turned up in a wheelchair. His defence was that he had a chronic medical condition, was disabled, and that he grew cannabis for medicinal use. He escaped a prison sentence, despite previous convictions.
So while he was presenting himself as disabled to the police and court in Hull, he was also claiming to be a full time pest controller with a care home company 165 miles away in Hertfordshire. The care home company that emailed confirmation has since closed down so cannot be questioned.
The court appearance in the wheelchair was several weeks after Letsure wrote its approving report, so Letsure can hardly be blamed for failing to predict it. But I found that in September 2013, the tenant was given a ten-week suspended sentence for drink driving, driving without a proper licence, driving without insurance, and breaching a conditional discharge for an earlier offence. And in April 2014, the same man was given a ten-month suspended prison sentence for conspiracy to steal.
If I found all this, why didn’t Letsure? It told me: ‘At the time of the reference in 2014, Letsure provided set information on the prospective tenants. We have completed a full and independent investigation into the reference process undertaken for this particular tenancy; we have found this to be compliant with the contracted delivery service.’
This appears to mean that Letsure carried out a tick-box check, and none of the boxes obliged it to see whether the tenant was lying or had a lengthy criminal record.
Oh, and the ‘full and independent investigation’? That was carried out by Letsure itself. Howards repeated that ‘all procedures relating to referencing were followed correctly’, and so did the Property Ombudsman who decided it was not reasonable to expect Letsure to go further than accepting the employer’s email at face value, even though you suspect it came from a friend of the tenants.
In fact, Howards went further, telling me all was well until 2017, when the tenants stopped paying rent. Howards say this was because of delays in carrying out certain repairs, and because you wanted a rent increase. You have denied this, and it was Howards themselves who suggested an increase, the first in three years.
Despite this unpleasant hint from Howards that you were a bad property owner, a senior figure at Spicerhaart Group – the company behind Howards – wrote: ‘I sympathise with you and the situation you find yourself in, because it is through no fault of your own. It is because of the tenant’s actions and behaviour.’
Howards declined to answer some questions on the grounds that the relevant staff member had left, and it kept no written records of whatever advice they might have given. They denounced some of the information you gave me as mere hearsay, because of the absence of their own records.
There is no happy ending to all this. I understand the tenants have left, leaving you heavily out of pocket. You relied on Howards to find good tenants. They relied on Letsure to vet them. But you, the customer, have been the loser.
Switch from Barclays – and you won’t starve
Ms T.F. writes: I opened my bank account with Barclays 15 years ago. I told the bank I was self employed, and that I would get large sums from the taxman as refunds for my clients. I would then deduct my fee and transfer the balance to the client. The bank told me I did not need a separate business account, and this was great for 15 years until suddenly my debit card stopped working while I was out shopping. Barclays had frozen my account.
Barclays froze our reader’s account
You prepare business accounts for sole traders, and at the moment Barclays froze your account it held £8,000, of which half was tax refunds that you were to pass on to clients. The bank told you your branch had discretion to let you draw benefits and wages to live on, but as you are self employed, you had neither of these so you were left without cash for you and your son to live on.
Barclays told you its investigations would taken ten days, but even after this, your account was still frozen. Every time you called the bank, you were told an email would be sent to the official who froze your account, but repeated promises to call you back were broken. Finally, after three weeks without money, you broke down and cried over the phone. This time, the bank did ring you back. The speaker said he had ‘pressed a button and sorted it’. Your account was open again, but with no explanation.
The bank told me: ‘Barclays is complying with its legal and regulatory obligations. Due to the nature of these obligations, we are unable to share any further information.’ This is the standard answer banks give when they freeze an account because they suspect their customer is laundering the proceeds of crime. You are guilty until proven innocent. And yes, it is all legal. I believe Barclays has advised you to open a separate account for your business. I would add, open a separate account at a different bank. Then if one is frozen, you and your son will not starve.
If you believe you are the victim of financial wrongdoing, write to Tony Hetherington at Financial Mail, 2 Derry Street, London W8 5TS or email firstname.lastname@example.org.
Because of the high volume of enquiries, personal replies cannot be given. Please send only copies of original documents, which we regret cannot be returned.
No mistake, your accident cover has been dropped
J.C. writes: I have been told by Saga that it is dropping my personal accident insurance policy. I have paid premiums for ten years and Saga is abandoning me. It was a policy covering up to age 90, and I am 81. Do you think the policy is being withdrawn because I am now a greater risk?
It would be ironic if Saga, of all organisations, were to withdraw insurance because of your advancing years. But this is not what has happened. Saga’s accidental death policy is – or was – a stand-alone scheme which customers could cancel without penalty.
Everyone paid £5 per month for cover of £25,000 for a single person or £12,500 each for a couple, in the event of dying in an accident.
Saga told me: ‘Following a strategic business review, we decided we could not longer afford accidental death benefit as a stand-alone policy and that we would close this product line for all customers.’ Staff at Saga say they know this will disappoint you, but they assure me this is no reflection on you or your age.
JEFF PRESTRIDGE: Get radical, Chancellor, and kill off the death tax
I know I am stating the bloomin’ obvious – and I know I’ve said it before – but with a Budget fast approaching I can’t help saying it one more time.
So here goes. Some of the taxes we currently pay and a number of the tax breaks we are given to encourage us to save for old age are either too onerous or far too complicated.
Yes, it is time for a radical overhaul and Chancellor Sajid Javid has the perfect opportunity to be radical when he presents this Government’s first Budget on March 11.
Inheritance tax and tax relief on pension contributions are both ripe for a good dose of radicalism from Chancellor Sajid Javid, says Jeff Prestridge
For Javid, there are none of the tricky parliamentary obstacles to navigate that faced his predecessor Philip Hammond, hamstrung as part of a minority government.
With at least five years of Conservative government ahead of him and Labour in disarray – ridiculously waiting until April 4 before unveiling its successor to the politically bankrupt Jeremy Corbyn – there can be no better time for Javid to show his mettle as a transformative Chancellor.
A Minister who is even prepared to unravel some of the complicated tax changes that his Tory predecessors (namely George Osborne) introduced.
Inheritance tax and tax relief on pension contributions are both ripe for a good dose of radicalism from the Chancellor.
Dealing with inheritance tax often resembles a minefield for those appointed to sort out the estates of loved ones. This is primarily – but not exclusively – a result of Osborne’s decision in 2015 to make the tax even more difficult to understand with the phased introduction from April 2017 of the ‘residence nil rate band’.
This is a £150,000 top-up to the existing nil-rate threshold of £325,000, meaning that £475,000 of an estate can now escape 40 per cent inheritance tax – provided the family home is passed on to a child, grandchild, great-grandchild or stepchild. It jumps to £800,000 if the deceased had previously absorbed their partner’s £325,000 nil-rate band.
As my colleague Marc Shoffman reports, Revenue & Customs has failed to adapt its various inheritance tax forms to accommodate this new residence nil-rate band. It means thousands of executors are unnecessarily filling in complicated forms they should be nowhere near.
The Office of Tax Simplification, set up nearly ten years ago to advise the Treasury on how the system could be made less perplexing, has already called for inheritance tax to be simplified. But its recommendations have concentrated on overhauling the various gifts that can be made in someone’s lifetime to mitigate the tax.
Javid may well just act on these OTS proposals, but he could be bolder – by either scrapping inheritance tax altogether (tres radical) or doing away with the residence nil-rate band in favour of a bumped up nil-rate band (radical and sensible).
Inheritance tax is a form of double taxation. Corbyn would have expanded its net because he despises inherited wealth. Even more reason for Javid to be a radical.
On pensions, the rules governing tax relief on contributions are screaming out for reform. None more so than the rule, introduced by Osborne, that restricts the tax relief available to high earners – those earning more than £110,000 a year.
Javid could be bolder by either scrapping inheritance tax altogether or doing away with the residence nil-rate band in favour of a bumped up nil-rate band, says Prestridge
This is done through something called the tapered annual allowance that means the amount high earners can put into their pension – while benefiting from tax relief – drops in stages from £40,000 down to £10,000 a year (these sums include any employer contributions). The more you earn over £110,000, the smaller the annual allowance becomes.
While Corbynites may rejoice at this measure, it has resulted in many high earners – doctors foremost among them – receiving unexpected (and big) tax bills for unintentionally exceeding their reduced annual pension allowance.
It appears the Government is keen to address this issue by pushing up the threshold at which the tapered annual allowance kicks in – from £110,000 to £150,000. Fine, but Javid should be more radical.
The allowance should be scrapped altogether as part of a radical overhaul of the pension system that currently disincentivises, rather than encourages, long term saving.
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