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Forget your whims and follow the mantra, Location, Location, Location !

A good few months ago we sourced a two bedroom property for a Mr Patel. He had invested in a couple of BTL properties in his local area of Milton Keynes. The properties didn’t’ really go up in value or produce any substantial amount of rent, they were just ticking over. Basically they were stagnant investments: hadn’t really gone up in value, and weren’t producing income every month.

The idea of investing in property is no doubt a good principle to follow, but where and how is the question.

Generally when people want to invest they look at the area local to them. This means it’s still in their comfort zone and they feel safe with the knowledge if there are any maintenance issues they can handle them directly. And in the future one of their children can live in the property, and they can all live as one big happy extended family.

However they need to be honest and realise then that the investment isn’t the main objective, it is more of a lifestyle choice.

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If it’s investment you require then the aim is how to make as much money as possible in the shortest amount of time. This is the aim, everything else is secondary.

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The other issue many investors get caught up with is the idea of investing in a leasehold property which most properties in Central London tend to be. There are a couple of reasons way:. First when they purchase a property they wish to keep it in their family for 21 generations, therefore if it’s not freehold they cannot do this as in the next 100 years or so the lease will expire. They’re not so concerned that they themselves will expire but the property should live on in their future generations. The second is a perception that the value of the property is declining. It is of course a fact that year by year the length of the lease is getting shorter. This does not mean the value of the property is decreasing, the value of the property in fact is increasing.

Again you need to ask what is the purpose of the investment? Is it to purchase a freehold property? Or is it to make as much money as possible? If it’s the latter then your decision should be based on this alone, to the exclusion of any other sentiments. Generally if you have two objectives you cannot achieve either one very well.

So our client was tired of having sluggish investments and saw the value of our proposition, and so decided to come in and see us and commit to our plan.

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It’s interesting that when it comes to any legal issues we consult a lawyer, and health issues we consult our doctor, but when it comes to property we follow our whims. I guess part of the issue is there is no set qualification, and it doesn’t help when all you need to be an estate agent is a mobile phone, so inevitably most of the mare not renowned for their integrity or knowledge.

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The investor signed our terms and we started the process. It took several months to get the deal done, this was due to him having a lot on his plate due to work and personal commitments. In the end we managed to source a two bedroom duplex apartment in Camden Town, a little outside of our patch but a very strong location, not simply because of the strong rental yield, but this patch will benefit from the regeneration of Kings Cross. An investment in the region of £1bn is being poured into this area, and so the future growth and rentability of the property is assured.

The property was in an ex council block, not pretty but again the objective is to make money not to have a pretty property. The property was purchased for £275,000 and a further £20,000 was spent refurbishing the property up to an exceptionally high standard. In this scenario we had introduced the builders and the investor had liaised with them directly. In our opinion the work was done to a higher standard than necessary, there comes a point where the extra input will not lead to a higher output.

Even considering this, the property was valued recently by two agents, one value was given at £400,000 by Foxtons, and another by Faron Sutaria at £350,000.

This was a buy and hold property and so it was rented on a three year contract at £420pw, thus giving a yield of just under 8% which is a very strong yield for this location.

Our client was very happy with the end result, so now he has got together with a group of friends, they are currently looking to pool their funds in and do this in a bigger way.

With more funds you generally get bigger bargains as the markets are like a pyramid shape, there are fewer deals at the top of the pyramid compared to down below where the masses reside. So clubbing your funds together with a group of friends is a good move, as long as everyone is singing off the same hymn sheet. Issues arise when each scenario is not laid out clearly, when there are too many decision makers, and when the objective is not clear.

Due to the larger level of funds, it has been agreed rather than a buy and hold strategy we will be pursuing a buy and sell strategy. This requires more work but should result in more aggressive returns. With the best will in the world it may not go to plan and you could end up being stuck with the property, so provisions need to be put in place for this scenario. The criteria is it must be a strong location and therefore to rent and refinance, which is the other option, will be a viable second route.

Earlier this week we held a seminar which had a turnout of around 30 people. It seems the appetite for investing is still strong and many recognise the value of our proposition, as many have bought properties already but they haven’t grown as much as the Central London market, neither is the yield anywhere as high. One couple we met at the seminar had purchased properties outside of London and now the debt has become toxic, meaning the value of the properties are worth less than what is owed. Luckily they are all on base rate trackers and so very low, this means they are producing income month to month.

The Real Deal

High Yield Two bedroom Flat in Little Venice,W2 – £249,950

Very good location and amazing views of Central London

The block was recently modernised and major works bill of £40,000 paid off

Rental income of nearly £21,840pa can be achieved.

Only 1% Stamp Duty

Call us now on 0207 096 1354 to secure this amazing deal.

Suresh Vagjiani

Managing Director

Sow & Reap

A Property Investment Company

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!Tips of the Week

Remember the mantra of property investment, it’s a bit like trying to be self realised, you must forget your whims and follow the mantra, in property it is Location, Location, Location!

It’s good to diversfy with property, but always keep the location in mind.

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