1st October 2016
We’re about to exchange on a probate property in St John’s Wood. The property is being purchased at just under £737k.
It is a two bedroom, fourth floor flat, in a well maintained block, with a long lease. It comprises of 825 sq. ft., which equates to £893 per sq. ft.; and the higher the floor the more desirable the property, generally away.
The property, being a probate sale, is dated and requires refurbishment. However, we will be doing the works in two stages, the first will cost no more than £5,000, that’s my aim anyhow. You do not really know what works are essential, until you have had a strip out and looked underneath the bonnet.
This will be a light refurb to get it to a stage of rental, as the location is so strong as long as the property is clean, it will be rented.
Then we will move to stage two, which will be a remodeling of the apartment. Here I mean shifting the kitchen around, building another bathroom, increasing the ceiling heights etc.
The reason we will be doing it this way is, that the managing agent may be cumbersome to deal with. This will take up time, and expense. It is a comfort to know there will be a stream of income coming in during this time, therefore, there is not too much pressure caused when things do not happen in a timely fashion.
The mortgage we got for this client is a redemption free mortgage, this means the property can be sold or refinanced without the need to pay a penalty. The purpose of doing this is, when the property has had its second stage of refurbishment, we can look to refinance it with a view of extorting some money from it.
This allows the investor to move forward and do other deals with the money extracted. Ordinarily you would have to wait for the mortgage terms to expire, and the property market to have risen in order to take money out, which would take about two to three years during a good time.
Currently the market is looking a little flat, therefore we are adding value and then extracting the additional value, this should happen within seven to eight months of completion.
We will aim to start the light works not at the point of completion, but at the point of exchange; this will save a couple of months of valuable mortgage payments.
This is a great time to purchase, and we are focusing on strong yield investments, typically 8-10% per annum. This will mean you’re making money, whatever the outlook in the property market.
Suresh Vagjiani
