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Hit & Run or Hold & Grow

1st September 2018

We have just exchanged on one probate property and completed on another.  The question we need to ask ourselves is what to do with each property.  Do we sell them on or do we keep them?

Currently, we are not in the sellers’ market; we are in a buyers’ one.  However, as long as we can sell them for relatively more than we purchased them, there’s quick money to be made.

For one of the deals, the client did not pay the stamp duty.  The solicitor was at a loss as to how this could be done, but there is a way.  This reduces our client’s incoming costs by a large chunk, and strengthens the case for a resell.

In the course of my dealings, I have met both camps.  Those who buy and sell aggressively, and those who never sell – they keep holding stock.  The latter patiently wait, and refinance when required.  A proponent of this school of thought once said to me, turnover is vanity and profit is sanity.  This does not actually make sense literally, but what he meant was trading in property might make you feel good, but it’s when you hold onto property long term that you really cash in on the asset.

My conclusion is there is no absolute answer.  It depends on a few things, including the individual’s nature and circumstances.

The issues with each deal mentioned above can be bifurcated. One side is dealing with the paperwork, the other is refurbishing the actual asset.  One property has a short lease, which needs to be extended, the scenario with the other property is a little more convoluted.  The freehold is in escheat, which means the crown now owns the freehold.  So this will need to be purchased off the crown.

Doing just the paperwork side of both projects alone, will make the properties more marketable and attractive.

The reason being, that currently, no mortgage lender will lend on them.  Once the lease issues are sorted out, they become eligible for a mortgage.  This opens the property up for both end users and investors.

When most people purchase a property, the majority of the money is not theirs, it comes from the lender.  Therefore, it needs to tick some boxes.  When a property cannot tick certain boxes the demand for the asset shrinks substantially.  And this opens up the possibility of a deal to be done, and a chance to resell the asset in a short space of time.

We will need to crunch the numbers with both of these, as well as try to elicit an honest response from a local agent, which is easier said than done.

Either way, there is no disputing these were hard deals we purchased for our clients.  There are more on the horizon, which will be crystallized in the next week or two.  Do get in touch, if you are interested in the next deal.

Suresh Vagjiani

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