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Beggars Can’t Be Choosers

Last week we completed on a two bedroom property in an Estate on the border of Notting Hill and close to Whitley’s in Bayswater. The property completed at 5.30pm and we had already arranged viewings for 6pm. We expected the property to go the same day, it had been recommended on this basis. We promptly received an offer for the property for £550pw. The property had been purchased for £320,000 this gives a yield of nearly 10%.

On speaking to the landlord he decided he wanted his son to live in there so he can save paying rent in Kensington.

From the outset we had advised to keep the investment strictly as an investment and not to try and do a live in /investment. I get this proposal every so often, where people want to invest but they want the insurance of living in the property at a future date as well if required. For that reason they want the property close to their home etc.

We advise there should be a strict line between the two.

Firstly properties are very liquid in the UK, this means they can be sold within a short period of time. In an auction at the bang of the hammer your property can be exchanged, 28 days later you will complete and get all your money, this period can even be reduced.

When considering an investment property it should be bought with what the market wants in mind, not what you would want. The market consists of two components, one is the tenant and the other is the end user/investor.

The tenant will be renting the property from completion. The end user/investor will purchase the property at a later stage if/ when you wish to sell. You may never wish to sell but taking this aspect into account will ensure long term future capital growth.

The tenant also needs to be defined. Will they be a DSS tenant, student sharers, or a city worker?

Each of these cases are distinct and will have differing requirement. Knowing who your likely customer is is key to ensuring your  investment works for you.

When for example renting to DSS frills are not required. The property needs to be hard wearing and safe, as there are more of these tenants then properties on the market . In short beggars cannot be choosers hence the amount for refurbishment should be minimal.

In order to attract students you may require free Wifi, a communal room, separate locks etc.

What will govern this is normally the agent who should know who the tenant will be before they come in, a thorough understanding of the market will reveal who the likely tenant will be. So the bait will match the fish.

Suresh Vagjiani

MD Sow & Reap

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