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Cheaper than wholesale

11th February 2017

We are in the process of closing a deal, this apartment is humongous at 2,185 sq. ft.  This is not the size to purchase as a typical BTL investment; generally speaking, smaller is better.  A colleague in the trade, who specialises in studios, commissioned a leading agent to analyse the occupancy rate in Central London of a studio, the report came back with a rate of 98.6%.  In addition, the 1.4% of void periods was not due to the lack of demand, but because the property was being refurbished.

So why the interest in this large lump?

The location is superb, north of Hyde park which is due for a spurt in growth.  This is backed by a Knight Frank report in late 2014, which confirms the clever money will go to the ‘poor’ side of Hyde Park.

Some people will always like to buy labels, they like the idea of owning a piece of Belgravia or Mayfair, they can then feel good about themselves and share this with others and gain their admiration.  However, if the goal is to earn money then this is the place to invest.

So, the location is excellent, and location is the first mantra of property investment; and the future seems bright; but what about the present?  What’s the discount?  Comparable properties currently on the market range from £1,000 to £1,335 per sq. ft.

This property is coming in at £755, which is about 25% discount from the lowest price on the market and a massive 43% discount from the highest.  Incidentally, in a new block in Wembley the prices are £778 per sq. ft.  This puts this deal into some context, this property is in W2 and has far greater growth prospects and it’s coming in cheaper than market value from day one.

So, two points of the deal have been clarified, the location and the current discount to present value.  The third point is the size of the deal, it’s simply not appropriate to purchase a large lump like this as a Buy to Let.  The statistics point to small is better from an occupancy point of view, also if you look at the demographics, the family nucleus is decreasing, people are living in smaller units and as singles.

However, this deal can be broken into three flats very easily.  It is being purchased with this proviso, therefore for this deal we are looking for three investors and not one.  Each flat will then have an approximate sq. ft. of 728 sq. ft., which is far more rentable.  The location will ensure a solid level of occupancy.  We have bought numerous apartments in this block for our investors already.  In short, you will be getting a retail investment at a wholesale price; actually, cheaper than wholesale.

Suresh Vagjiani

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