Last Wednesday at 9.30pm I had a call telling me we had just exchanged on a deal in Ealing Broadway for £4.8m. Luckily our lawyer does what is needed to complete the deal and so he stayed in the office answering queries until the purchaser’s lawyer was ready to do the exchange.
We had ourselves exchanged on this property for £4.2m only seven weeks prior to reselling it for £4.8m. We knew it was a good deal even at the price we were initially offered it at which was £4.5m. The property consisted of four commercial shops on the ground floor with a residential property above; the residential had planning for 12 one bedroom flats, on which initial work had started. This was done purely to keep the planning permission alive, if work does not start planning could lapse.
The sellers were particularly difficult in this transaction. First of all they did not want to sell the property in a company, despite it being no skin off their nose. And secondly after exchange they proved very difficult to allow access into the property.
As soon as we exchanged we went to work on reselling the property back on again. We had an initial offer of £4.6m with another party which we were progressing with. The agent was told in order to get his full 2% commission he would need to get us £4.8m as we had agreed only 1.5% on the basis of a £4.6m sale.
So he secured the deal at £4.6m at 1.5% commission, and then went to work on getting a higher offer whilst the current buyer was progressing.
In all fairness until the deal is done there is always a danger of either party pulling out. Conversely in the above situation the buyer could have pulled out leaving us hanging.
At this level of the market you generally get people who know what they’re doing and how to operate, especially when there is already a buyer on the table. They know as soon as the 2nd contract goes out they and their solicitors need to move fast as the original buyer will be alerted and get their skates on.
In a nutshell the deal was done with a number of separate investors whom we had brought together. We had raised £2.5m in cash for this deal, meaning it was oversubscribed, normally we aim for 50% of the purchase price in cash which in this case would be £2.25m.
Only £420k was required to be committed in cash. It took rather a long time to close this deal due to the negotiations around the deal and to get the price reduced.
This was to the frustration of some of the investors who in all fairness deposited the money on time in the lawyer’s account in anticipation of a quick exchange.
Finally after a protracted negotiation we managed to exchange on the deal; much later and for £300k less than they were asking for.
Once this was done we went to work on the resale of the property. Our logic was simple, there are investors who do residential and others who do commercial. Let’s split the investment up and sell the bits on to the relevant parties. Ealing Broadway is a strong and vibrant area and an area which is increasing in value almost week by week. The property is also in the middle of a new development called Dickens Yard.
The commercial ground floor units had an interesting angle to them, if you vacated all the tenants you would have a large floor plate. What was interesting here was that the rear of the building backed on to a car park and therefore this would be ideal for deliveries. On the front side you have the Broadway which has a double red line this means no stopping. For a high street supermarket this would be a godsend for deliveries, which they need daily due to a lack of storage space. The current rental of the commercial is £183,000, with a high street supermarket you would expect a rent of no less than £250,000 this would increase the value of the commercial alone to £4m at least.
The upstairs too had various angles, one was to redo the planning and increase the number of flats. The planning it seemed was done simply for resell purposes and didn’t have much thought behind it.
The point was this deal had plenty of potential to expand in many different directions if we ended up with it.
However it was the trade which happened. This gave a short and sharp profit. A solid return on the money invested which was in this case £420k. The returns for the investors will be 65% net over a two and a half month period. Needless to say the investors were exceptionally happy with this deal.
For one group of investors this was the first time they were working with us, this was their test run. Normally it goes like this:
Uncle comes to see me and says he has got £50k to invest, we say you cannot do much in central London with £50k, and it is only central London (and a few exceptions) where we recommend.
You therefore need to combine your investment . He agrees, the £50k turns into £70k. Uncle then call s me up and says he wants the next deal very quickly. Great! Ok Uncle how much money do you have to invest and Uncle says £750k in cash!
I say Uncle why didn’t you say in the beginning?
This is normally the protocol. I do understand this as the proof of the pudding is in the taste. But it does get annoying too, as the track record is there for all to see.
However this group were very generous in their level of investment especially for a first deal and they were very pleased with the level of return in the short space of time. Needless to say they’re now in for the next deal, in which they are planning to increase their investment and rotate it into our fund which will be doing deals such as this on a continuing basis.
If you like the sound of this return we have a track record of all the London trades we have done over the last couple of years.
We have ways to make your money work hard for you using property as the vehicle. If you’re interested please call our office and see how we can work your capital.
I believe that over the next two years you will see London property prices rise to even higher unprecedented levels.
This is a great time to invest and this is one of the strongest methods to make your money work hard for you. Get in touch with us now.
Prince Albert Road, London, NW8
Purchase Price: £1.6m
- A very spacious three bedroom balcony apartment
- Opposite Regent’s Park
- 24 hour porterage, lift, communal roof terrace and underground parking
- Share of Freehold
- End value after works expected to be around £2.35m
Call us now if you would like to have a piece of the pie!
Sow & Reap
A Property Investment Company
!Tips of the Week
There are two ways to source a good property investment, one is to buy a ‘Below
Market Value’ property, the other is to foresee the trend and buy at market value.
Buying in a strong location reduces the risk.
Normally the best buy and flip opportunities are on the top of the pyramid, i.e.
priced at £1.5m and above. If you don’t have the required cash, you can join hands with others and start investing.