Although at first glance it seems incongruous to consider a pharmacy as a retail business (which often appear more as a modern day convenience store with cosmetics, greetings cards and snacks), in conjunction with a health care practice such as a dentists. However, the role of the pharmacy has evolved over the last 10 years or so and the increasing diversity of over the counter sales should not detract from the role of a pharmacist as a vital professional.

They now offer more patient councelling and advice than before to customers and are a convenient source of help for minor ailments. As well as offering support for giving up smoking, healthy eating and family planning. A pharmacy cannot however escape the traditional retail environment where business management includes marketing, finance, accounting, customer relations and stock control.

While Pharmacies generate a worthwhile revenue from over the counter sales, their main source of income still comes from their contractual obligations to the NHS and PCT’s to dispense prescriptions. This has been the main attraction to purchasers and bank funders of pharmacies as it determines a value of goodwill and security of income. The security of such businesses is further bolstered by the ‘control of entry’ test that excludes new applications for inclusion in a pharmaceutical list except under strict criteria or certain exemptions.

The demand for pharmacies is likely to continue even with the significant changes and upheaval that will take place in the face of the ‘Comprehensive Spending Review’. Whilst the NHS has been ‘ring fenced’ from the spending cuts, the available government funding will barely keep pace with inflation. Whilst inevitably some sacrifices will need to be made, the funds for pharmacies are unlikely to be significantly affected. Indeed such health care practices are likely to be of greater appeal in the future.

The Dental market has been plagued with uncertainty over recent years and dissatisfaction in respect of the provision of NHS/PCT contracts following the introduction of the Personal Dental Services.  Whilst new contracts have been introduced to simplify pricing and attract more dentists, many have not been happy with the change.

And research has shown no increase in patient numbers. In fact dental visits have dropped. Although this could be due in part to the economic climate and the fact that very few people are entitled to totally free NHS dental treatment.

It might therefore be a surprise to learn that even with the current climate being what it is, the demand for dental practices has never been higher. The highest prices are being paid to the practices with strong contracts, good reputations and a long NHS waiting list.

The demand for dental practices is likely to continue even with the significant changes and upheaval that will take place in the face of the ‘Comprehensive Spending Review’. Whilst the NHS has been ‘ring fenced’ from the spending cuts, the available government funding will barely keep pace with inflation. Whilst inevitably some sacrifices will need to be made, the funds for pharmacy and dental provision are unlikely to be significantly affected. Indeed such health care practices are likely to be of greater appeal in the future.

Whilst there has been a reduction in consumer spending and less frequent customer visits to pubs, the average spend when a customer does visit has increased. This is due, in part, to food sales. It seems customers are viewing visits to pubs as treats rather than the regular occurance it used to be.

There are a number of other factors  affecting this sector including the smoking ban, particularly in older town centre pubs . As well as a rise in business rates and, for some, Sky subscriptions. There has also been the price competition over recent years with supermarket promotions and a rise in discount shops offering sales in some cases at cost price.

It seems that the future is going to be a very tough time for the older style ‘boozers’ and only the best community orientated businesses run by entreprenuerial owners will continue to prosper.

With food sales being the main saviour for businesses with some companies forecasting a growth of 3.5% in eating out over the next five years, there is no reason why a food friendly pub, cannot  return to a growth pattern. Particularly if a economic recovery occurs.

In terms of valuations the multiples of profit has fallen to 4 to 6X yearly profits against 8 to 10X profits which was achieved before the credit crunch. These are also related to freehold pubs rather than leasehold pubs where it is hard to achieve any premium on the lease.

At this stage you will often hear the solicitor say  ”We are waiting for the searches to come back”.  But what are these searches?

We asked a solicitor and were given the following information:

• Land registy search – This supplies the title deed and plans for the property. You can apply for a copy yourself for £8 at www.landregistry.gov.uk
• Local authority searches – These show any planning permission connected with the property.
• Drainage searches – Does the property have sewage and water provided by a utility company?
• Environmental search – Is the property near any contaminated land?
• Chancel search – This is concerned if your property is in an area that has a liability to maintain the local church.

Solicitors tend to use agencies to obtain these searches for them. This is much quicker than having contacts with all the various search providers.

Typically searches take 7-10 working days to come back from the agency to the solicitor.

The total average number of Buy-to-let mortgages on the market is now 508 compared to 403 in the previous quarter. There is now also a new lender on the scene taking the total number of BTL lenders to 23.

The demand from Buy-to-let investers is what is driving this rise as rental demand grows. An average yield from a vanilla BTL rose to 6.3% from 5.8%.

The  Association of Residential Letting Agents (ARLA)’s 6,000 members state that the proportion of tenants to properties has reached the highest level since records began.

Three quarters of respondents believe the demand is outstripping supply. The increase is particularly acute in London and the South East and suggests that there is an insufficient supply of property to meet tenant demand.

The survey has  shown that tenants are staying in their properties for longer, wary of trying to find a new property in such a competitive market. It is now at a record 19 months.

• Residential property
• Commercial property

Investment mortgages for residenial properties are also known as buy to ley mortgages or residential investment mortgages and are provided for houses, flats and other residential property. Typical tenants include families, professionals and students.

Investment mortgages for commercial properies are provided for semi commercial property and standerd commercial property such as a retail shops.

For leasehold property the leaseholder is not responsible for the building insurance as it is the freeholders responsibility. The freeholder will take out a block policy covers all the leasehold properties that exist under the freehold.

What is common is for the block policy to state that the noted interest on the policy are all mortgage lenders and leaseholders. If this general interest is noted on the policy then the lenders will usually accept this and not expect their individual names to be noted.

Before you understand investment valuations you need to understand the most common type is a valuation based on vacant possession. This type of valuation assumes the value of the property is empty of any tenant in the property and what the property would be sold for based on just the “bricks and mortar”. You will sometimes hear  the term a “bricks and mortar valuation” but the correct term should be Vacant possession.

Investment valuations differ in that they consider the cashflow a property is producing from rent. An allowance is usually made in the cashflow for rental voids and landlord costs but once the net rent is calculated then the valuation is calculated against a typical yield that an investor would expect as a return on the property. The yields vary depending on the risk and can be from 6% to 12%.

The lowest yields are typically associated with low risk tenants (ie a bank that is a tenant for 20 years renting a high street premises) and the higher yields would be associated with more riskier tenants, where there is a higher chance of voids and non payment of rent.

When does an HMO obtain an investment valuation instead of a vacant possession valuation

This depends on the property in question and can be better explained by looking at two examples of HMO’s

Example 1 – A residential property over 2 storeys that is let to 4 tenants on multiple tenancies. This is technically an HMO once it is let to 3 or more households.

However the property didn’t  need a change of planning permission to be a HMO and doesn’t need a HMO licence because it is only 4 tenants. In the example the property is likely to be valued on a vacant possession basis because the core characterics of the property have not changed from a standard residential property.

Example 2 – A residential property that has been converted and extended and has 3 storeys and 7 tenants in the property. The property has a planning classification of an HMO which is  ”sui generis” and also has an HMO licence in place. The property is fully let and producing a rent of £30,940 per year. In this example the property through the change of planning and the HMO licence has changed from a residential property to an HMO and should therefore be valued on an investment valuation basis.

These two examples illustrate the differences and if you have any questions, feel free to call us to discuss your specific property.

This can be important for experienced and professional landlords who cannot meet the minimum income levels in 2 to 3 years of £25K to £40K per year. This is usally for very good reasons such as costs have been incurred improving the portfolio which resulted in a small loss, or the landlord has decided to take a repayment of a directors loan.

In these cases the credit and applicant are very credit worthy so it is great to see more choice entering the market.