25th March 2017
Last week I attended an auction after a very long time. The purpose was to purchase a small studio in Hallam Street, a stone throw away from Park Crescent. Park Crescent faces Regent’s park, currently half the crescent has been knocked down and an expensive development is coming up in its place.
This is the same road where I purchased another studio on behalf of a client back in 2012, for the tidy sum of £350,000.
This flat is now worth conservatively £550k, this price is currently dampened due to the works going on around the crescent. This is off putting for renters and end users alike, and purchasers are surprisingly short visioned, even when it comes to investing in property.
The investor, for whom we sourced the auction deal, was in the fortunate position of being a cash buyer. She had just days before offloaded on another property we had sourced for her, again in 2012. The property we originally sourced was in a high rise block in Maida Vale, the property was pretty much unmortgagable, save for a couple of very high interest niche lenders. This was due to the construction type and not the fact it was a high rise, this type of block was built just after the second world war and was built to fulfil a housing shortage, since then the properties have not come down and are still standing.
The property being unmortgagable actually suited our client. She was psychologically averse to taking a mortgage and wanted to have property which generated a good rental yield. Since the lack of mortgage options on this property it attracted a discount compared to other properties of the same size. The purchase price back in 2012 was only £215,000. For a two bedroom property in W2 this is exceptionally cheap. This meant it would have a yield of 10% plus. It was recently put on the market for £369,000 by a local agent and achieved a price close to the asking.
This meant the investor was in the fortunate position of purchasing in cash. This opens up the door for buying in auction and purchasing short lease properties which are unmortagagble. After short listing several, one was selected, a short lease studio property with only six years remaining. Given the instability in the market place now is a good time to be both buying and extending leases.
The property exchanged successfully on the day for £120,000. I was hoping to grab the deal for much less, but there was one particularly stubborn bidder who drove the price higher.
What was amazing from my client’s point of view, was that she sold her current property and purchased of the new one, all from Peru while on a Shamanic retreat for several months. This has been a totally hands free investment for her, as everything was handled by us. We will also be handling the lease extension and the light refurbishment of the property. I imagine the hassle will not be in doing the work, but in getting the permissions from the managing agent.