A few days ago we finally sold the last flat from a block of 14 flats we had purchased. The property was completed on the 31st March 2014, we had agreed a two month period between exchange and completion. This gave us enough time to resell one of the flats on the completion date and had several more under offer by the time we got to completion.
The property was called Newman Court and was on Castlebar Rd, Ealing, W5. It was one of the most well-built blocks I had seen, the property had 14 car parking spaces located on the front and a rear garden too. The developer had put his heart into this project and hadn’t cheaped out in the way he built. All the rooms were well proportioned and the communal areas wide and well maintained.
The deal was agreed in January 2014 and I was asked to come and view a freehold block of 14 properties, in a prime road in Ealing called Castlebar Rd. The deal was through an agent but was off market. We met the owner, an old school Irish gentleman, who had clearly made some money in his time.
The property was built well, and he didn’t try and reduce the square footage to the bare minimum to try and squeeze more units in. The properties were large, light and airy, many came with balconies.
The seller was old school and we were eager to do the deal there and then knowing how hot this area was. One of the reasons for this is we had been offered this property by another agent for £6m. This agent hadn’t even seen the property and was coming to see the property after us so they could agree the deal for a lot less and then flip it back on to us. Hence we were keen to close the deal there and then before they came. This is the sneaky and incestuous world of property, especially in prime parts of London.
However being an old boy he refused to shake hands with us, and commit there and then knowing there was a viewing later on. As it transpired the vendor took an instant dislike to the other party who came across very egotistical and inquisitive; he simply didn’t want to deal with them. We were consequently able to secure the contract on this and then had it pulled. However after we agreed the deal a fellow property trader whom we have done plenty of business with contacted us and we got talking;
The conversation went like this, “Are you looking at anything?”, “Yes there’s a block of flats somewhere in Ealing we are looking to buy.” …….silence. “Is that a new build block in Casltebar Rd?”…..”Yes how did you know?”
Apparently they wanted to purchase the property and had the offer agreed for the same price, but they never received the contract – we had.
They were not prepared to let the deal go.
Two things can happen, one is we compete and the highest bidder wins, or more sensibly we agree to work together and purchase the property at the agreed price. We went with the sensible option and agreed the latter, so we purchased the block through the fund we had launched.
The area of Ealing is going up heavily, there is major regeneration going on in this location, and it is rare to find properties which have been so well made and designed with a discount of this level. Properties are selling fast at current market values and therefore there exists no reason to give any discounts.
We purchased this property for £5.65m, paying about £400k per flat. The property qualifies for a multiple dwelling relief on stamp duty therefore we paid only 3% on the block as opposed to 7% it would have attracted if it was done as one dwelling.
As soon as we exchanged, we moved quickly into action appointing the two most aggressive agents in the area for the individual resells. The flats were getting sold quite quickly, but as we had completed we wanted as close to asking price as possible for each of the flats.
In terms of buyers, we were not looking for the First Time buyer or the novice investor, we wanted someone who could execute the deal quickly and would not ask silly questions along the way. Our plan was to keep the conditions of sale strict, a deposit to be taken when the price has been agreed, exchange will happen within 7 days and completion within 28 days. There is no reason why all sales cannot be done in this way, this ensures there is some level of seriousness and security for both sides. Auctions operate in this manner and also new build properties as well. However what happens often is files are kept on a lawyer’s desk and they do not move in a hurry.
When we are flipping a property, meaning reselling the property prior to completion, we would be prepared to give a discount from the open market value. This is due to several reasons, firstly we have only put 10% into the deal, secondly we have not paid the arrangement fee for financing or the stamp duty, and thirdly we have a time pressure on us. Once we cross the threshold of completion and the money is already spent then we have all the time to achieve top money for each of the flats.
In the end we sold all the flats totaling £6.9m, netting us a good profit. Funding had been prearranged on this deal at 80% LTV this means we put in £1.12m into the deal. This is the beauty with property deals, it’s easy to get funding for deals. This allowed us to more than double our money. You cannot get this level of borrowing for any business deal you may have. This is one of the great things about property, money can be made using the bank’s money and very little of your own.
The property was bought in the vehicle of a fund we had set up in December 2013. This combined with another block we purchased in Earls Court have been a couple of the transactions the fund has completed on and resold on, all within the first year. The second property was a block of flats in Earls Court on the sunny side of Nevern Sq. Both areas are increasing heavily in price. Earls Court is attracting probably the heaviest investment in all of London. These two blocks have been resold but holding stock like this is also very profitable. The fund has been designed to have a short shelf life designed to give investors a high return in a short space of time thereby laying the foundations for our next fund which we will be launching next year where we will be looking to raise £40m, this will be listed on the main stock market in London. So investors will benefit from the transparency and regulation this brings, as well as being able to cash in their investment any time they wish.
New Year Plans
Currently we are managing assets in excess of £50m and are looking to launch a new fund listed on the London Exchange of £40m. This will allow us to have a purchasing ability of£80m.
- In 2015 our emphasis will be more in holding on to large blocks of flats long term. We feel this will be more in tune with the market. Of course trading properties will still be going on in the background, but the main objective will be to hold onto stock.
- The range of current set of investors vary from someone as little as £25k and upwards.
- We have various ways of working and are keen to build relationships and are open to working with other parties and introducers.
- If you feel there is some common ground why not have a chat with us, we are going to be particularly aggressive this coming year and realise the importance of building good workable relationships with those who have the same values as us.
If you find this exciting, we are just a phone call away!!
! Tips of the Week
Investing in bricks and mortar means the investment is real, hence it cannot simply disappear, like non tangible investments such as stocks and shares. Moreover property provides a good long-term gain and you can expect it to deliver regular income too.
Control your emotions. When it comes to an investment property try not to mix it with your personal preferences, don’t think how your family will fit into the rooms a few years down the road, keep the two separate.