We are currently exploring a deal which has the potential for a buy and resell. It consists of a freehold block of flats. The property was made to hold within the family, not to resell back on. From the photos, the construction looks extremely good and the proportions very generous; perhaps too generous. There is a lot of land surrounding the block. The building occupies about one third of the site.
This then brings up the question of whether there is planning potential on the excess site. From a cursory glance it looks like this is a real possibility. However, on further inspection, the current seller tried and it was refused. The reasons for refusal can be looked at more deeply, and potentially addressed. The other point to bear in mind is the council criteria may have changed, as the planning was applied for many years ago. The trend is for planning to be more relaxed, and this comes from above, not at a local level.
Therefore, the main angle seems to be to purchase the block wholesale and sell the individual units as retail.
The initial quoted price looks like there is about a 20% discount on the individual market prices. However, the market is turning, caused by the increase in mortgage rates.
So, the key to this deal is the ability to offload the units; this boils down to price and timing. This is not a question which can be answered sitting behind a desk. It requires local knowledge; especially, with the market being in a state of flux.
The possibility of not selling all or part of them has to be addressed as well. The plan would be to create separate leases from the freehold. By splitting the freehold into leases you have allowed the flats to be valued individually at retail prices. This will reduce the deposit required in the deal.
Once we have established there is still strong local demand, we would look to sell the whole deal off prior to completion.
This would mean we will need to negotiate a long completion, 6 months would be ideal, 3 months as a minimum. Access to the properties would be required, this would mean the vendor and the tenants would need to be on board.
My take on this deal is the agent has priced it on the basis of normal market conditions. This is not where we are at, therefore there needs to be a correction in the asking price. I’m doubtful they will take a steer from me. The market will dictate. It will take a few low ball offers, or perhaps a high one which fails to complete, but succeeds in wasting time and annoying the vendor, and agent. This will set the scene for us to come in.
On this deal I believe there are some angles to mitigate stamp duty, this would need to be confirmed by a specialist.