People like the idea of purchasing something off market, as then it’s secretive and has an aura of exclusivity, which purchasers like. It makes people think they have got a deal. This is actually an illusion, as for the property to have been offered to you means it is on ‘the market’ even if it’s only through one person. Many times we have been told something is ‘off market’ and then we find out every man and his uncle know of the property. The objective of purchasing a property is to find an excellent investment opportunity to make as much money as possible in the shortest time period. It’s not to purchase an off market property. If this is the criteria we can certainly fulfil this for the stubborn client, but that may not be the best investment for them.
One of my sources tells me the ‘off market’ property the actor Mr Shahrukh Khan bought in Park Lane was a flip where someone made £10m instantly. He was probably led by advisors who were also paid handsomely for their introduction.
A lot of Indians do not like the idea of purchasing a leasehold property, they prefer freehold as it will then stay in their family for the next 21 generations. They also fear the value decreasing as the length of the lease decreases.
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Again if the objective is to make as much money as possible then whether it is leasehold or freehold is irrelevant, as a leasehold in Central London typically will rise faster in value than a freehold in Harrow.
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Sometimes when we source a property for a client they are surprised to see it on the market for everyone to see. We have to explain to them the reasons why this is a good deal, using comparables which are past properties and the current situation on the ground. Sometimes we have to pay full market value to get these properties and convince the agent to go with us as purchasers just to get the contract to our solicitor.
One example was a 1st Floor, two bedroom property in a purpose built portered block on Sussex Gardens. The block was very nicely maintained and was managed by Knight Frank. The property was a repossession on the market for £499,950. The agent told us we need to offer full market value to secure this property. The property was beautiful and looked over the front gardens, but needed work. The lease was 76 years. Our research told us there is a dire lack of decent properties on the market and prices are being pushed up. Inevitably the buyer asked one of his relatives who stated this wasn’t worth the price and there was nothing special. Luckily the buyer went with our guidance and completed the transaction. The address was Flat 33 and it was completed on 12th September 2011. The property was revalued by the bank recently on the 20th June 2012 and a RICS Surveyor valued the property at £630,000. This in our opinion is still under priced. We believe this property should achieve £700k in the open market. The first aim of a RICS surveyor is not to give an accurate valuation believe it or not, it is to cover himself from being sued should the property be repossessed and not achieve the stated value.
Another example, is another property which was in Burlington Close, Maida Vale. We knew the block well having already purchased two properties there earlier. The block was managed by someone who lives in the block. This is actually a big plus and was not stated by the agents who probably didn’t even know this fact.
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As a result of this the block is extremely well kept and efficiently managed, as the manager doesn’t want to spoil his own environment.
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Another interesting point about this block is it is believed to be an ex council property but in actual fact it is not. The solicitor discovered this during his searches. The block was originally built to house council tenants but as there was an over supply of housing stock for council tenants it was then given over for private housing, again a factor which the agents marketing the property were not aware of.
This property was a three bedroom duplex flat, previously we had purchased properties there at £320K for two bedroom flats. The property was priced at £360,000, we offered low as the basic principle is that you cannot go down if an offer is accepted, you can only go up. The seller had a sale just fallen through and was desperate to sell. After some tussling we secured it for £325,000. We did a few viewings but for one reason or another many of our clients didn’t bite it. Eventually we told a trusted client who had purchased from us previously to buy it blind, on our say so. He did so, and after a few thousand pounds of work the property was rented for £460pw. The property was purchased on the 20th January 2012, it was revalued by Foxtons on the 8th May 2012 for £450,000.
Another property which we sourced for one of our clients was in 22 Lapworth Court, in Maida Vale near the canal. This was purchased by a client who, though it was his first time, trusted our judgement and went in. The property was purchased in 16th September 2011 for £325,000. This was bought from an agent we had a very good relationship with. We were called first when this property came on the market. It was secured cheaply on the basis we move quickly. On this occasion the agent was on our side and we managed to do the deal without it ever hitting the open market. The property was valued on the 27th April 2012 for £425,000 by Foxtons. The works cost around £18,000 to bring the property up to standard, the rental on this property was £525pw. This client is currently purchasing another property from us.
We have been in this area for over 10 years, we have now developed a nose for smelling a deal.
The Real Deal
There’s Icing On The Cake
- Spacious studio
- Secured for £350,000
- Underpriced huge studio of 451 sq ft close to Hyde Park
- Potential to convert to a one bedroom for enhanced rental and capital value
- Works out to only £776 per sq ft purchase price
- Comparable properties priced at £1,000 per sq ft
- If you want to secure this deal, call us now!
Suresh Vagjiani
Managing Director
Sow & Reap
A Property Investment Company
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!Tips of the Week
To determine if anything is a good investment,you should look at the risk versusreturn factor. Generally if an investment ishigh risk it is high return and low risk meanslow returns. Property is considered low risk,hence the banks will lend you 75%, BUT youcan make high returns, if done well.
When purchasing your property if yourintention is to live in it you can buy it using aresidential mortgage which is a lot cheaper……your intention can however change!
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