Recently we exchanged on a couple of properties, one last week was a studio for £215,000 and the other was a large house in Ealing for £800k, a similar property was on the market for £1.5m done up, ours was dilapidated. Both happened to be probates. The latter one is a trade the other is a buy and hold property.
This property is in Sussex Ct in Spring St W2, minutes away from Paddington station. It is a large studio at 350 Sq Ft, this is a fair size in Central London. This property in our opinion is worth £275,000 as it is, with no improvements.
Often people ask us why we are able to get deals and they are not. Several reasons: firstly you’re more likely to look after a regular customer than someone who is a one off. We are regular clients of many agents and suppliers of property. Secondly it is also important not that you simply get supplied the deal but you can execute it well and in time. Thirdly you also supply properties to those who have given them to you when the opportunity arises both for resales and rentals; you stay loyal to your suppliers.
This property actually was very problematic to close. We closed this deal with another client about 6 months ago. The managing agents who are in charge of assigning the lease to the new owner where extremely picky with references. I do understand the importance of getting references before you allow someone to move into your block, but the situation here got very pedantic. References were asked for in a certain format and they were supplied in this format, and then an additional criteria was requested. This led to much delay, and there’s not much you can do to rush the sale. You have to dance to their tune.
We had a similar experience when dealing with a property in Park Crescent which we purchased and resold, it was a pain to purchase and resell. We had to simply wait, chase and keep fulfilling their requests.
As it happened, for some deals we had been borrowing money from a private Jewish family who have been lending for generations from their roots all the way from Iran. Whilst sit ting down and having a general chit chat with the man in charge, I found out he owned the freehold of the block in Spring St!
This was a revelation. So I passed him the details and no doubt the managing agents, which he also owned, gave their justification for the delay. But all of a sudden things started moving a lot more rapidly.
The license to assign was granted and we managed to get them to approve the transfer of the lease into the new name. However this was a probate property. A probate is when the property is being sold after the death of the former owner. Often the family does not really know the value of the property and simply want the money in their pockets as fast as possible.
All of a sudden the family started to delay matters and wanted to come to London before the exchange, and also decided one of their family members wanted to purchase the property etc. Basically putting a spanner in the works.
By this time the original buyer was getting very annoyed with the deal. He was purchasing the property with the aim of refurbishing it and reselling it for a profit. His reasoning was if it took him this long to purchase the property how long would it take for him to resell it. The managing agents will drag their feet in the same way and are likely to break the resell. He had a point.
However on the other hand you simply cannot purchase a property for this amount of money in this location, period. The prices here would be about £1,000 per Sq Ft.
The property did require work and would benefit from a lease extension from its current lease of 63 years, but this actually is not a short lease in Central London. You cannot do much to a studio, a maximum of £15,000 will be spent on this property.
The property now also has the benefit of nearly 6 months of uplift. This is no small matter when properties are increasing 20% per annum. Your uplift on this property over 6 months equates to £20,000 , without parting with any money!
Before this buyer officially pulled out we had another buyer lined up already. This 2nd buyer we had was a no nonsense seasoned investor. He took 30 seconds to make up his mind; this is why he was selected.
The seller tried to play hard ball and increase the price. Whilst they were trying to do this I made sure the 2nd buyer lodged his deposit with the lawyer so we were ready to exchange.
They were trying to push us up to £220k, and in the end we settled on £215k which was still a steal. The new buyer decided to purchase in the name of a limited company. This is not an issue but does restrict the number of lenders you can approach for funding.
The exchange was done without the mortgage offer in place, this is in motion currently. The underwriting also takes longer, as not only do they check the individual out but also the company.
I am pretty sure we can get about £60k more than what our investor has paid for this property right now. However he doesn’t want to trade this property. This one is part of his long term portfolio.
Selling a property is only one way to extract the capital growth of a property. The other is by way of refinance. If you refinance a property you do not pay any capital gains tax. However if you sell a property you will be liable for this tax. If you never sell you never pay this tax and you can continually keep extracting money from the property by way of refinance. A simple method, but one that many property people use. Some of them just never sell . There are many Jewish families who arrived in the UK after the second world war with some cash and in their wisdom they invested in property in the City of London. Their strategy was never to sell but simply pass it down from generation to generation.
Certain parts of Central London will never come onto the market for they will never be sold. It often seems to me that we are only dealing with the scraps of properties these families have left over for our entertainment. There are certain and few family names you hear again and again.
So this was an excellent deal which is rare to find at this level. It is a given that there are many investors who can afford to purchase at this level and therefore these deals are hard to come by.
This is the reason our focus has gone to higher value properties where you still can find good margins. We are able to bring the benefit of purchasing these deals to the smaller investors by allowing them to purchase a small chunk of a bigger deal which is worth more – generally– than a smaller deal.
Currently we are looking to close a part commercial and part residential portfolio in Ealing, which is being bought for under the £5m mark. This will be bought in various chunks by several investors with a view of breaking it up and reselling the chunks, ideally before completion.
This is like purchasing something wholesale and selling retail. If you want a piece of this pie call our office now.
St John’s Wood, London, NW8
Purchase Price: £575,000
- A very spacious three bedroom top floor apartment in a popular block
- Long lease
- Moments from high street
- Close to Regent’s Park
- We expect the end value after works will be £700k
Call us now to reserve!!
Sow & Reap
A Property Investment Company
!Tips of the Week
Property prices in good locations tend to be high, but these are the areas where you get the maximum capital appreciation. So it’s better to club together to ensure you purchase a diamond.
When investing, most of the money will be invested by the bank not you, remember they will always do a valuation to check their investment is secure, this is an additional check for you.