Know Your Buyer

Last week Friday we exchanged on a property for £790,000, the contract was received in our solicitor’s office on the Thursday.

We had two investors lined up jointly for the property; one had already tasted money with us, having exchanged on a property for £240k and resold for £260k prior to completion. All he had to do was to move the funds from one lawyer’s to another lawyer’s account to exchange. The other was a fresh investor and hence needed more persuasion to exchange on a property he hadn’t seen, and for that matter I hadn’t either! Of course my colleague had seen the property but more importantly we know it’s worth more through due diligence and the opinion of a local agent, who is now in the process of selling this on for£850k plus.

The intention here is to not complete the transaction but to trade the property prior to completion. As always we must prepare for the completion despite strongly anticipating the property to be resold prior to completion.

The sellers on this property were particularly stubborn and insisted on the solicitor turning up at their solicitor’s office to do the deal; they were not prepared to issue a contract.

In this scenario we had to dance to their tune if we wanted to do the deal, and we did as there was a lot of margin in this deal; we also had a time deadline to adhere to of 4:30pm on the next day being Friday.

With some last minute running around and chasing the property got exchanged in time. This was done within 48hrs of agreeing the deal.


By performing at this speed you naturally attract more deals, especially ones which require quick execution; and deals which require quick execution are generally under priced as the sellers, for whatever reason, want to exit the deal fast. You need quick on the ball lawyers to do these kind of deals. Deals can take different time periods to execute, sometimes taking months or sometimes taking days; much comes down to the solicitor used.


Many investors don’t understand why we are able to source properties at well below market value in central locations, in a market where there doesn’t seem to exist any angles. Everything seems to be at market price, and in time it will achieve the price asked. When there is a margin it is swooped upon!

One of the reasons why we are able to get deals has been illustrated by last week’s deal; it is our ability to move fast when it’s required. This not only helps us get deals but helps us negotiate the price down; as a consequence exchanges are often done without the lending finances in place.

To date we have never been unable to obtain finance after exchanging. Done at a reasonable LTV this is not such a gamble. Typically we like a low LTV, the rule of thumb for us in the current environment is 50%. If for any reason a main stream lender would turn the funding down we always have recourse to bridging funds. The bridging market is very competitive unlike mainstream lenders. It has been predicted this market is set to grow by 50% by next year. It’s easy to see why, given the lack of appetite amongst the high street banks.

With the above property we will be looking to finance using a lender which has no redemption penalty and a very reasonable interest rate of 3.29%; with an arrangement fee of £2,000 which includes a free valuation. This is a very good deal given that you have the option of reselling the property at any time post completion without any fees to worry about.

It is also prudent to have another lender in place, like a bridging company who will be there, should the first lender not produce an offer in time.

The way we increase the chance of a property selling quickly is to ensure we don’t eat the whole cake, meaning we leave some margin for someone else to enjoy. This helps our property sell fast.

There are only two types of buyers in the market, the investor and the end user. The profile of the end user is they normally purchase with emotion and less with a need to have a margin.

Our resales are geared towards the investor as they normally see the need to move fast in order to secure the deal. Of course this isn’t set in stone, you may find the end user moves fast to secure the deal, but generally this is the profile.

This is not always the case if we’re refurbishing the property; we have a few projects on the go, the aim with these is to sell to the end user. The properties will be furnished richly, right down to cushions and paintings, as we wish to appeal to the emotions – we do not want investors coming to purchase these properties.


These are the tactics developers use in their show homes to sell off plan properties and the same principle is used when selling new cars. The advertisement and the final product very often have nothing to do with common sense, price or efficiency but is designed to appeal to the emotions.


Of course bridging funds are expensive, but often they are used only to get the deal over the line. There are two main reasons why investors use bridging, one is for speed and the other there is no alternative. For example, if you are looking to purchase a property which requires work, getting a Buy To Let mortgage will not work, as the property is not lettable. The basis of a Buy To Let mortgage is that the rent pays for the mortgage; properties which require work cannot be rented. There are a few refurbishment lending products out on the market, where they lend you funds to purchase and then you develop, and then call the surveyor around again to revalue. They tend to force you to stay with them long term by having long redemption penalties; hence bridging has become a viable option.

When the property is in a lettable condition you should shift it to a more sensible interest rate as soon as possible. This obviously reduces the monthly outgo but it also allows you to hold out for the highest price; and not be held to ransom at the high level of interest rate. Instead of profitability the project then starts to become a liability.

There are seasons where the market perks up; it’s important any properties you’re developing hits these spots so you can ride the wave.


The Real Deal

London, SW3

Purchase Price: £975,000


  • A large two bedroom flat in this highly fashionable and sought after location
  • Long lease
  • Priced at £1,140 per sq ft
  • End value after minor touch up will be around £1.25m


Call us now to reserve!!


Suresh Vagjiani

Sow & Reap

A Property Investment Company


!Tips of the Week

Whether it is a BTL or Buy and Flip deal, the most important aspect is Location. Find a property in a desirable neighborhood where people want to live in.

When flipping properties first impressions count; pay attention not just to the inside of the property but the outside as well. You cannot show off all the upgrades done inside the house if potential buyers are turned off by the outside appearance and its surroundings.






Suresh Vagjiani
Suresh Vagjiani
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