Right time, right place
19th May 2020
Yesterday we completed on a deal for a client; a small BTL deal, but the second in a row, with hopefully more to follow. Both in the same location, and both purchased blind – by the client, not by us! The area that both these properties were purchased in was South East London. We have zoned in on a particular location here for many reasons, backed up by an in depth in-house report.
There was a last minute run around on getting this completed on the day. It transpired that the original signed mortgage deed and the TR1 form did not reach the solicitor’s office. Therefore, on Sunday evening we had to arrange a courier from the client’s house to the lawyer’s office.
The monies, both the deposit and the lender’s funds, were sitting in the lawyer’s client account awaiting completion. There is a risk if the money is not used the lender could recall the funds back. In the current environment, we could not risk any delays.
The client is a professional, and works in the financial sector, yet had amassed a couple of hundred thousand pounds in their bank account not doing very much.
Once the first property had been purchased, financed and rented they were keen to deploy the rest of the capital and replicate the process. The low finance rate of 1.65% on a 2 year fixed, and current rental yield, means there is a healthy return on a month to month basis of £510; on a deposit of £68,000 all in, nearly a 10% return on the funds deployed. This is the net monthly income after service charge, ground rent, management fees and interest.
This is far in excess of what they were getting in the bank. In addition, the property was chosen very carefully in a spot which is expected to rise naturally over the next 5 years and mature nicely.
If you’re purchasing property, an initial discount will of course give you a good feeling; but where will the property price go after this initial euphoria has subsided? If you hold a property for 5/7 or 10 years how will the asset perform over this period? And why?
What you are trying to do when choosing a location is look at the development and infrastructure improvements in the area, specifically connectivity. Then by purchasing in the location you will be riding a wave, without running around. Remember the first mantra of property investment: Location, Location, Location.
Ideally, property has the unique attribute to actually make money for you passively, this can be achieved if bought in the perfect location, and if it is managed very carefully.
I strongly believe the future is bright for this location, also the current environment has been dampened for obvious reasons. A third component which makes this a timely investment is the mortgage rates, for example, 5 year fixed rates are exceptionally low at the moment. There is an alignment of stars for this investment currently.