Coming up to Christmas is a time when the property market traditionally slows down. This is what is supposed to happen anyway.
Instead we are having lots of deals which are being pushed into our office even though we’re trying to close the doors for the holiday period; and it’s difficult to say no to a good deal, especially if you have Gujarati blood flowing through your veins.
One of the properties, which we have been almost forced to do, is a Pub not too far from the last deal we have done in Olympia. It’s bizarrely similar to the last deal we closed only a short distance away from this one.
The property consists of a pub on the ground and lower floors with two floors above which have been used as a residential by the pub owners.
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As with Pub deals it is sometimes sensitive, meaning sometimes the lessee and the local public do not know the property is being sold. With this deal we had to discretely look around the premises only on the ground floor, without alerting the lessee or customers. Only the ground floor could be seen. The upstairs will generally have the same floor plates, though the basement sometimes can be smaller both in floor size and height.
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The square footage looked very dubious to me; it was being sold on the basis it had a 1,350 sq ft area but in my mind this looked too small, though I could have been wrong as it was over crowded.
It will be best in this scenario to get it double-checked just before we’re about to exchange. The property is in a quiet road and has residential on either side of the pub, therefore there’s a chance we’re able to do the whole property into a residential, meaning flats on every floor including the ground and lower ground.
The last deal we had closed is going through the planning motions. Generally it is best with planning to convert a piece of the building at a time rather than the whole lot in one go, so as not to scare the planning department at the council, as generally they don’t like to see too much change in one go.
We will be applying for a mansard on top of the two flats we have already in existence, and then once approved we go back and apply for another floor on top.
This means we hope to have another 4 flats above the existing pub. At a resale price of £750k per flat this will be a good return.
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The second deal if it goes through will benefit from the experience we will have gained from the first, it will ride through the path cleared by the first deal. We do not expect to hit any posts on the second deal.
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This is an off market deal, it is due to come on the market shortly, because of our relationship we were able to get a bite at the apple early. We had agreed this on Friday, saw the pub on the Saturday (only as a customer), and are currently waiting for contracts to come in with a swift exchange this week.
The price is slightly higher than the similar property we purchased recently, but then the sq ft is claimed to be higher at 1,350 compared to 900. There are many options to this deal. Not simply that we have to purchase, develop and resell; it could be we simply get all the planning in place and then resell the property with the benefit of this. This is the way to make the most money with the least amount of work. For simple paperwork you can look to charge an extra £500k on this property. For the last deal we have had an offer subject to planning for £2m.
It all depends on your game plan and of course your cash flow. If cash is tight and you do not have regular lumps of money coming in its best you work out ways to release the money from the project early on so you can engage in other deals.
This does not mean you have to resell the property, once planning is in place you can release money by way of a refinance. This may mean all your funds get released from the deal. This is an important angle to look at, as this is what will allow you to progress your level of investments or keep your funds buried in one deal.
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It is also difficult to predefine everything with property, as you may have your plans but the deal may go in another direction. So it is best to have multiple plans and work on all of them simultaneously.
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Another deal which we had recently purchased and successfully sold was one in Ealing Broadway which we exchanged for £4.2m and resold for £4.8m. We have been offered another deal just down the road from this one. The deal consists of a retail row of shops with a floor above. The plan here would be to get planning for 15- 20 flats above the existing property. The precedent has been set by next door who are building four floors.
Whatever deal you do it is likely you will attract more of the same type. One reason is the market, the agents will know you have performed on the deal and know you are a sure bet. So if anything comes up which fits the criteria they will instantly think of you, rather than going for an unknown variable. They like security, people who perform when they say they will and don’t ask unnecessary questions in between.
The other reason is naturally you will be on the lookout for similar properties; you develop a radar for these types of deals once you have done one successfully. Recently we also went to see some blocks in Goldhurst Terrace, having been working on a project there for nearly a year these got blipped on our radar. Three in fact! Strangely they have all come on the market at the same time. These looked good on the surface, however on closer inspection two were on the other side of the road, and these were different type of buildings altogether, no bay windows and tiny gardens. The other one came with a short lease and the cost of extension killed any margin in the deal. So we moved on.
The Real Deal
Kensington, London, W14
Purchase Price: £1.5m
- A large pub with a great opportunity to develop into residential
- Freehold
- Can add three flats to the property worth £700k each and keep the pub as it is
- The pub can also be converted into residential later on subject to planning permission
- Recently we bought a pub a stone throw away from this pub and we already have an offer on, subject to planning.
Call us now to reserve!
Suresh Vagjiani
Sow & Reap
A Property Investment Company
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!Tips of the Week
“Big will not beat small anymore. It will be the fast beating the slow.” Don’t be slow in your decisions regarding investments, else you will lose out on great opportunities. In our experience more money is lost in property by investors not making a decision than making the wrong decision.
Most expenses, such as repairs, agency fees, etc., can be off-set against tax due for Buy To let properties therefore reducing your liability. Check the HMRC website, there is an amazing amount of helpful information on there.
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