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Make hay while the sun shines!

Over the last few weeks I have had three properties which I am involved with offered back to me to purchase! The funny thing was I never even put any of them on the market.

The first property was ‘passed’ to me by a runner. These aren’t people who run marathons; in the property world they are people with mobile phones who act as agents and sell properties by just being in between. They generally operate on the principle if you shovel enough ‘dung’ some of it will stick. Often they say they can deliver properties when in actual fact they cannot, at times there can be as many as four people in the chain before you get to the owner.

This runner that we deal with in all fairness doesn’t fit the above description, he is one of the few honest ones, who lays down the cards and tells it like it is. He knows he won’t be cut out of the equation and so always lays his cards down. He offered me a property for £8m one day before we were due to complete on it for £6m!

He stated he couldn’t get me in until after Friday. I told him of course you can’t as we haven’t completed yet!!

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Another property we also hadn’t even put on the market had completed. But it got out it was offered by an agent who in turn got it from a runner called Jimmy, who in turn got it from someone else. Our investigations turned cold at this point as ‘Jimmy’ wasn’t prepared to reveal his source. I went about it in the wrong way, in a forthright manner I told the agent this is my goddamn property he is offering back to me and where on earth did he get it from given I hadn’t even placed it on the market for sale. He promptly disclosed his source, but couldn’t dig any deeper.

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In retrospect I should have instead placed an offer and have it pass through the chain and back to me, this way I could have flushed out the culprits.

The third property wasn’t even in Central London but a large office block in Harrow. This was presented to me as a deal with planning and came with the possibility of enhancing planning permission. This deal was passed from a runner via a second runner, who was in touch with the business partner of the person I was involved with.

The above scenarios show two things: one the incestuous nature of the property market, and secondly the acute lack of shortage of good quality stock. It always comes down to basic supply and demand. The demand currently comes from international buyers. Most of it is focused in the central areas. In truth there are not many places in the world which have the attractiveness of London, its popularity has not diminished much despite recent economic conditions. The cost of entry is not as high as some other countries, neither are agents’ fees. Here it costs anywhere from 1% to 3% to sell a property, in the US it costs double of this. Not to mention the transparent legal structure which is world class. I mean even as Indians settled in the UK we would still be nervous in purchasing property in India, many simply wouldn’t and if they did so they would be concerned about the title and future security of the property. Even closer to the UK countries such as Spain do not have the transparency and do not command the confidence as London does. Clearly there are not many property markets like the London one in the world.

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The other component which determines the price of anything is supply. Supply is tight generally and fundamentally. Currently there is an acute shortage, hence properties which aren’t on the market are being dragged into the market and circulated around.

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Therefore price is destined to rise and rise steeply. Currently I’m trying to close a deal where the owner is abroad; it’s taken one and a half months just to get the authority for the lawyers and money laundering in place. By the time the deal exchanges I know three months will have passed. During this time the price will increase even though I know I got a deal to begin with. So I’m in no rush to conclude the deal. It’s coming through a source whom I’m paying so I’m not that worried, but there again you never know.

We’re encouraging clients to refinance and jump on this wave whilst it’s rising. Over the weekend I met up with a client for whom we had sourced a property for £295k in June 2011. It was a two bedroom ex council duplex flat. With a £10k budget it was turned into a three bedroom and attracted a market rent of £460 per week. On his modest salary of £38k he hadn’t managed to save anything over the three years, yet the property has gone up to £500k; which is a rise of roughly £70k per annum. This is the beauty of property, it rises by itself. The unfortunate thing is there are many in the position whereby if they rejig their finances and make use of their property equity they could probably earn more in capital growth than themselves going out to work.

The first property was a leap of faith, and he had never ventured into property in Central London. He did however leave a lot up to us to decide and agree. Now he’s a convert and it didn’t take much to convince him now is the time to remortgage and reinvest to jump on a wave which has already risen.

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Previously I have explained how we have moved on as a firm, and now have a couple of more strings to our bow; one is the syndicated investment where you become part of the collective and invest in large projects which give high returns; another is a fund we will be launching shortly.

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These will give you a lumpier return and put you always in the position of a buyer. Your money will work more aggressively for you than in a Buy to Let which you hold for several years.

When they do some parts of the country won’t be hit as hard as the others; you need to study the demographic of the region you’re investing in. For example in Jewish and Indian areas there was little effect after the credit crunch as there was very little credit to crunch. The same goes for Central London, many of the property owners are HNW investors who are parking their funds to keep them safe, for a rainy day. Not short term speculators, so there will be little effect; unless of course the Mansion tax comes in.

The Real Deal 

Freehold Building

Weybridge, Surrey, KT13

Purchase Price: £1.65m

  • Great opportunity to buy a freehold detached
  • building in this quiet residential location
  • Ten studio flats and three one bedroom flats
  • Off-street parking
  • Garden
  • Around 3,550 sq ft area
  • Rental income of £111k per annum once fully let

Call us now to secure this deal!

Suresh Vagjiani

Sow & Reap

A Property Investment Company

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!Tips of the Week

The early bird gets the worm! More people lose money from not making a decision than making the wrong decision when it comes to property investments.

To generate good profits by flipping properties you need to be able to pick the right property, in the right location, at the right price. And all this requires the right knowledge.

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Sow & Reap

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