How Hard Is Your Property Working For You?


Recently we completed on a deal for a client who was interested in developing a property portfolio. He had already dipped his toe into property having purchased a couple of properties around the Harrow area. These properties have remained pretty much stagnant in price and are not really producing any income due to the high level of service charge associated with the block they’re in.

They have been on the market for sale but not surprisingly no one has been rushing to purchase them. He needs to achieve a certain price to get his costs and get his money back.


Though his money has been invested in property, this is not enough, it is not working as hard as it should be.


It is very difficult to remortgage this property as the loan to value given by mortgage lenders has dropped to 75% LTV, pre credit crunch times the LTV was as high as 89%. This coupled with a stagnant/reduced sale price means remortgage is out of the question.

Currently times are great for you if your mortgage product is tracking the base rate by a small margin, but those on standard variable rates are forced to stay with the current lender, unless of course they can pour funds into their investment.

It is said buying a bad property is like having a bad haircut, if you wait long enough it will always grow back. This seems to be the case with these properties.

When the management of a block is terrible, there comes a point when the landlords and residents cannot stand it any more and they get together and change the management company, then the block starts to recover and increases in value.


Our client spends a lot of time abroad and therefore is very time poor. He earns a strong salary but realises this is not a pace he can keep up forever, hence he was keen on developing streams of income apart from his main salary. A good decision to make.


A few years ago he indicated he wished to start building a property portfolio, as many people say, but he called me up in January of this year and said he’s ready to start. In mid February we called him up and presented the figures of a property we had in mind for him and he took a visit to the property. The property was in an ex-council block and actually looks pretty unattractive.

When a client says he wants to visit the property it is not always a good thing as many investors judge the investment by first appearances, for example they may say it’s ugly and hence they do not wish to purchase. If this was a marriage proposal I might understand this type of reasoning. This however is an investment, and whether it’s ‘ugly’ to the purchaser or not is irrelevant, one should consider the numbers: the yields, future growth prospects, the location and how the market perceives the property.

One client a few years back came to see a property in Westbourne Park W2, and this was the exact feedback he gave, that the property was in a block which looked ugly. The property in question was a £275,000 three bedroom flat, rented for £720pw, thus yielding about £37,000 pa. He was from Sussex, in a part where the properties were spacious and had character. In the end we sold this property to a seasoned property investor who never even saw the property but went purely by the numbers.


The yield in retrospect was a temporary honeymoon but the investor earned this level of income for three years, hence he already made his deposit back purely from the rental income.


Luckily our client didn’t say that this property was ugly or anything of the sort, being a busy man he simply texted to say he wanted to go for the property. So we took over and got the wheels moving. The long term aim from this client’s point of view is to use us to start and develop his property portfolio from now until he retires, funded through a combination of remortgaging properties to extract their growth and adding his own funds, but never selling.

The property in question was in an ex-council block in Camden, close to Kings Cross, thereby benefitting from the £1bn regeneration programme underway in the area. With ex-local properties the service charges tend to be very low and the lease tends to be a good length typically over 100 years. The property was situated on the first floor of the block and was a duplex consisting of 712 sq ft. A generous square footage given it has only two bedrooms.

The property was agreed in February and completed in late June. Due to this time lag the property actually increased in value over this time period. Though the property was purchased for £275,000, an estate agent gave it a current valuation of £350,000. We felt this was a bit optimistic and place the realistic value at £325,000.

Not only has the property got a built in equity of £50,000, we rented this property to a company for £450 pw thus giving a yield of 8.5%.

The return on our client’s investment is a lot higher as only 25% of the purchase price was required for the deposit, therefore only £68,750 was required for the purchase, the rest was funded by the mortgage company. If we allow a generous £25,000 for purchase and resale costs this is still a very good return on his funds given the short time period.

In this situation the client wishes to use his own builders as he has a long standing relationship with them. The refurb and furniture only costs £3,000. The builder was so amazed with the numbers he now wants to purchase a similar property. The problem is, given the rise in price it will be even more difficult to find a deal with similar numbers, as the prices have increased and this has now become a historical price.

I have heard from some of our readers that the investments we write about appear too good to be true, we are happy to provide full proof of this and any other example we have written about to the serious investor. The purchase price is recorded on the land registry, and for the rental figure we have a tenancy agreement, so the current valuation is the only variable. A call to a couple of agents and you will get a fair idea of the validity of the valuation.





Suresh Vagjiani

Managing Director

Sow & Reap

A Property Investment Company



!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.

Your tenants are your customers, treat them well and they will treat your property well.


We offer a Property Sourcing Service, so call us now to see how we can help on 0207 096 1083 or email

Our Address: Westbourne House, 14-16 Westbourne Grove, London, W2 5RH



Suresh Vagjiani
Suresh Vagjiani
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