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How to kill two birds with one stone

Last week we agreed two deals, both in prime locations, one in Notting Hill and the other in Earls Court.

Both deals look good from the analysis we have done, but in truth the real rigorous layer of work only starts when we get the contract in. Why is this?

Because London is London.

It’s a fast paced property market, there are buyers all over the place hiding in the dark, runners trying to screw deals up, and it’s easy to lose control, especially on lucrative deals which we believe these are.

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Real research takes time and money, therefore it should be spent when the deal is locked, and not before, if it can be helped.  However there is also a fine balance, if you pull in deals and lock contracts down and do not perform you will lose credibility very quickly, and it will have a snowball effect.

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What makes the Earls Court deal so exciting is this area is probably one of the strongest areas to invest in at the moment.

It also has a colourful history.  It was originally owned by a noble family called the De Veres for a period of 500 years.  Though owned by them, it is doubtful it was ever visited by them.  Since then it has had many illustrious people residing in the local area, such as Mahatma Gandhi who lived in 20 Barons Court whilst studying to become a barrister at University College in 1888; and Marcus Garvey who lived at 53 Talgarth Road from 1935 to 1940.

What’s more important than the history from our point of view is the future growth of this area. Earls Court has been designated as an opportunity area in the Mayor’s London plan. The intention is to develop this area in various phases to minimise disruption to the residents.

The Earls Court Masterplan has been created by renowed architect Sir Terry Farrell and Partners. Farrells are considered to be the UK’s leading architect planners with offices in London, Hong Kong and Shanghai. With a Masterplan, as the name suggests the growth of the area is likely to be holistic rather than lop sided, meaning the area is likely to have leisure, work and live areas in the right proportion along with the relevant infrastructure.

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The plan proposes the transformation of the Earls Court Project Area into four new urban villages and a 21st century High Street, blending the spirit of the past with the best of tomorrow. The villages will include around 7,500 much needed new homes for people on a range of incomes and new work spaces and offices will generate thousands of new jobs.

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The London Borough of Hammersmith & Fulham (LBHF) and The Royal Borough of Kensington & Chelsea (RBKC) formally granted outline planning permission for the Masterplan for the Earls Court Project on 14th November 2013.

The project will bring huge benefits not only to Earls Court but the surrounding areas with an extensive retail high street, business and residential accommodation, healthcare and educational facilities.

The Earls Court Project Area spans a massive 77 acres of land, and along with the homes and offices it will include tranquil public squares and gardens which will be a haven from the hustle and bustle of the city.

The area is very well connected and is located at a point where Kensington, Chelsea and Fulham all meet, therefore providing great potential for value increases throughout the area.

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The plan since inception has been met with some resistance from the local population, understandably so, you cannot make a move of this size and it not ruffle a few feathers.

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The project we have secured is a development project, with a purchase tag of £6.5m and a finished value nearly double this amount. It is a project which is not reliant on the growth of the location, the figures used on the resells are based on current values and conservative ones.

The property consists of a freehold block located only minutes away from Earls Court Station. So regeneration plan or not buying near a train station in London is always a good place to purchase.

The resale on this deal in light of the future government tax proposals could be done in an interesting way.

There are only two buyers in the market place, one is the end user and the other is the investor. The end user will not be affected by the changes in April in stamp duty as it only applies to investors.  The government is due to hike up the stamp duty by 3%, furthermore it will start to phase out the ability to offset the cost of your mortgage against the rental income.  This is the equivalent of paying tax on your turnover as opposed to your profits.

The end product for this project could be tailored in a way where it would be attractive to the BTL investor.

Rather than purchasing the property directly it could be structured where they would be purchasing the shares in a company which holds the asset.

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This means in one strike the BTL investor has saved 3% on stamp duty, or any stamp duty for that matter as this deal is being purchased in a company. Further they have no fear of the new offset rules as they only apply to individuals and not companies.

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This would be a good resell strategy and there will be a market for it which will grow as time goes on. As long as the accounts and property is being managed properly I see no reason why this will not prove to be an attractive way to invest into the future. In fact this kind of model will begin to thrive in the new world the government is shaping.

The government is currently making purchasing and holding property for individuals very difficult. It almost seems as if they wish to flush them out of the market completely.

The Notting Hill deal is a smaller price in comparison and can be purchased for only £850K, it is freehold and a development deal with an end value of around £1.7m.

If you want a piece of either of these pies please call the office now.

The Real Deal

Edgware Road, London, W2

Purchase Price: £1.9m

  • A large two bedroom raised ground floor flat in a highly sought after location
  • Share of freehold
  • Very high ceilings
  • Period features
  • Low service charges
  • Close to Baker Street, Regents Park, Hyde Park and the bustling cafes and shops on Marylebone High Street
  • Very good buy and hold opportunity

Call us now to secure this deal!

Suresh Vagjiani

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!Tips of the Week

Leveraging equity in your home, or equity from another property, can be an effective way to buy an investment property.

Cheap is not always good! Go for properties which will give you good income and capital growth, not just which are priced low.

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