A Deal With Distress Signals
I went to see a property in West London where the guide price was exceptionally low. This was a house subdivided into three illegal flats, and had several enforcement notices on the property; including one which referred to the property having being bought with the proceeds of crime.
These are all good signs when you’re hunting for a deal. It was being sold by receivers. Furthermore, it appeared in a duff auction; it was not based in London. I would have expected this to be placed into a major more established London auction house, in order to achieve the highest value.
However, the driving factor for the decision could have been either a personal connection or the timing, perhaps it needed to be placed in the next available auction regardless. This deal is guided at £375K which is exceptionally cheap for a property in the location.
We were offered a deal many years ago, in a similar manner. It was a housing association who needed to sell the property immediately, to take it off its books, for some accounting reason presumably. The timing was such that selling it in an auction would be too late and therefore it was offered to us for the meagre sum of £350K. This was for a freehold block in King Cross. I kid you not.
My assumption that this was in a duff auction and therefore would perhaps slip through the net for most people, proved to be unfounded. Perhaps several years ago this would have been the case. I used to purchase good lots in lesser known auctions and simply place them back into larger and more established ones, without doing anything to the property and make a profit for my client.
However, in today’s environment, everything has shifted online, and investors have become used to bidding online. Therefore, it has become a level playing field. This level playing field has encouraged many smaller auctioneers to appear from thin air and enter the arena. No one now produces a physical auction catalogue, which is a shame as you get a better feel on a 3 dimensional catalogue rather than a 2D on screen experience.
The remnants of the dubious activities were still left in the property. All the usual signs – blacked out windows, aluminium foil, lumps of soil. Not the first time I have come across this, when one looks at the numbers it’s easy to see why this is a very very lucrative venture to get into. The barrier for entry is open. We have come across a few properties which to the dismay of the landlords had been used to grow weed. Although, in my opinion this plant has become unproportionally stigmatised for various reasons.
This project requires someone with some experience, not a first timer. My feeling is given the above this deal will go for a lot more than what it has been guided for.
The property is in a superb location, but the very fact it requires a lot of pre work on the project, will mean many buyers will get emotionally involved with the project. This means there’s is a stronger chance the emotional element will ensure the property goes for more than it is worth. But auctions can be hit and miss. Let’s see what happens on the day.