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Don’t be left with a big legal bill, and no deal

3rd September 2019

We are currently analyzing a portfolio with a large number of mixed use properties.  There are all sorts in this bag.  Not simply in terms of types but also in terms of geography.

It is attractive to us, as there is a rental income, and it’s a piecemeal project; in contrast to planning, whereby you have no income, and God forbid if you have lending on the deal, or to compound matters if you have a bridge, even worse!  You’re digging a hole for yourself, and your counter party the planning authorities are often a law onto themselves.

With this portfolio you do not have the same pressure, as you will be slowly disposing of the assets, or enhancing them as the market permits.

The conveyancing on this deal is likely to reach over £100K, therefore it is vital to structure the deal in the right manner to ensure you’re not left with a big legal bill and no deal.  Which could be one scenario.  This should be done not only with the vendors but also with the lawyers.  When the fee is agreed the upside and the downside should be negotiated.  It would be wise to define the abortive costs upfront.

It will be interesting to carve up a strategy for this deal.  Ideally, we should look to dump the dead weights in the portfolio.  These can be defined as properties in locations where the growth looks flat for the next three years and there can be nothing to do in regards to enhancing these properties.  The ones which can be uplifted should be, in terms of planning applications.  Or even conversion into HMOs where possible; this is more so for houses.

There are many close to train stations.  These should ideally be kept.

I’m unsure what the now deceased vendor was thinking when he purchased this lump of properties.  There is absolutely no common thread around what he was doing.  It seems like he was purchasing on a whim, whenever he felt the urge.  And perhaps the location of the portfolio spread follows where he has lived.  This is the way many landlords start up, simply by purchasing in their locality.  This gives them the comfort of proximity, so should anything go wrong it can be handled inhouse.

However, this is large price to be paying for comfort.  The objective should purely be based on where the highest growth rate is going to be in the coming years.

We have just completed a deal last week, one of numerous deals in South East London.  We have identified a location here which we believe will increase in the next 7 years back to back.  This is backed by an 18 page indepth report.

If you would like us to match you with a property, please do get in touch.

Suresh Vagjiani

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