A Double Edged Sword


Some time ago we completed on a property in Bravington Rd, Maida Vale. This property was formally a freehold block consisting of three one bedroom flats.

The property was bought at auction for £726,000.

The aim was to convert this into a two bedroom ground floor flat with a garden, a two bedroom on the first floor, and a three bedroom on the top floor.

The end goal is to sell the individual flats, achieving £1.2m in total, this was our estimation based on what we saw in the local area.

The construction costs where £200k. So the gain on this would be £274,000.

The property was purchased in cash originally to save time as it was picked up in the auction. On one hand it’s always good to have some level of borrowing on the property. One of the important points with property is you can make money……with the bank’s money and not yours. If you think about this most of the money used to purchase property normally belongs to the bank not you. Typically on a Buy to Let mortgage 75% of the money used belongs to the bank.

On the other hand our Indian instinct tells us borrowing is bad. First generation Indians always worked hard to ensure their properties where debt free as soon as possible so they could pass something through to the next generation.

If you analyse the word mortgage you will see it is very revealing. The word mort means death and gage has its roots in chains and being tied. Often the root of a word reveals its true meaning.

Credit is a double edged sword. In recent years it has caused havoc. Not to the Amish community in the US however, they are a Christian society who live off the land, and refrain from taking debt unless it’s for land.


So if used in the right way it can generate disproportionate profits and in the wrong way can drown you. Credit is a knife, in the hands of a surgeon it can be used to heal and in the hands of a criminal it can kill, it boils down to who is using it and their competency.


Going back to our block, because this was a development project the bank valuation has been done very thoroughly. In the past we have had some ridiculous exchanges with valuers when purchasing single BTL properties. I remember one valuer who had marked a property down as an ex-council property when it wasn’t. I called him up and asked him where he got his information from, he replied it was the (very elderly) pensioner living as a tenant in the flat. I told him I had spoken to the council and they had confirmed it was not. He had the nerve to ask me to send the documents to him. So he, a RICS qualified surveyor, who is paid to do the job gets his info from practically thin air, and we have to document our claim!

The valuation report for the block was refreshingly well done and well researched. The value placed on the building in the report dated 4th December 2011 was £1.2m on the assumption three flats where to be made and reconfigured. The build cost had been estimated very accurately at £200k which is roughly what we will be paying the contractors. It helps if the valuer is based in the local area. At times valuers come in from way outside of London and give ridiculous prices.

It is always good when a well done valuation report confirms your estimates. But the truth is the level we quoted of £1.2m was conservative, the valuer naturally follows suit as one of his aims is to cover himself for liability. As these properties will come on the market in Spring I believe we will achieve more than the quoted figure, time will tell.

The report even went on to recognise it is “apparent that a two tier market has developed”. This is due to increased difficulty in obtaining funding with cash-rich purchasers available to take advantage of distressed sales situations such as the one we had picked up.

The housing market still sees house prices flat although the London area still continues to buck the national trend.

The report stated: “House prices are predicted to remain at their present level over the coming months although London and the South-East still fails to follow the national trends with some areas showing increased demand and activity leading to rises in prices.

We consider that demand for well placed residential properties such as the subject remains reasonable at appropriate levels.”

The fact there is a two tier system is very important. This means investing in property in the right sector will yield profits.

Many do not believe property will rise, as there’s a tendency to paint everything with the same brush and have become frozen with in action.

Central London is still set to rise and there will be more opportunities coming on to the market at the higher end. We appreciate this level of purchasing will be hard to reach by most, this is why it’s a good time to get into consortiums and be ready to strike. Call us to find out more about how this can be achieved.

The Victorian House


The most notable advance in house design was the provision of internal bathrooms and WC’s leading to unprecedented improvements in personal and domestic hygiene. At the beginning of this period hot water had to be heated at the kitchen fire and carried, losing heat all the way to wherever it was needed. After use the dirty water had to be disposed of equally laboriously. By the end of the Victorian age a hygiene revolution had taken place. Most towns had public supplies of clean water and sewage disposal systems and most new houses were provided with bathrooms, running water and plumbed-in water closets.

Despite these advances large sections of the working class population at the beginning of the twentieth century were still having to share privies, wash in cold water at the scullery sink and take baths in portable tubs. Those at the opposite end of the social scale were slow to adopt bathrooms, although in their case it was through choice. Some wealthy families were enthusiastic about indoor plumbing, but there was a greatdeal of aristocratic resistance to bathrooms, and to plumbed in fitting generally. As long as there was a cheap supply of labour to fetch and carry water for them, the upper classes had little incentive to install expensive equipment for the same purpose.

Thus the development of the modern bathrooms was largely a middle class phenomenon. The effort of keeping a family clean in a house with neither a bathroom nor an army of servants was a powerful motive to acquire indoor plumbing.

Suresh Vagjiani

Managing Director

Sow & Reap

A Property Investment Company

Suresh Vagjiani
Suresh Vagjiani
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