There are two reasons why we lose deals: one is someone comes in and offers more than us; or the property has not been presented as it really is, meaning as we peel the layers off things which we weren’t told about start appearing. I cannot say the description is a lie as this would be against the property misdescription act. But there is something to be said for lying by omission.
When we are outbid we can either pursue the deal and offer higher or better terms, or simply sit back and wait to see what happens. It is easy to make an offer, this doesn’t mean the buyer can walk their talk and complete the deal. At times the property lands right back in our lap after the highest purchaser doesn’t perform. This is what happened with a property on Kilburn High Rd where we offered £2.675m and there was a higher offer on the table at circa £3m. The other party’s lawyers were asking questions and then asking more questions. We stayed at the same level but kept giving the agent a nudge to let them know we are still there to do the deal. Eventually they sent a contract out to us whilst the other deal was going through, we ended up with the property at about £300k less than the other party.
We had a similar scenario more recently with a Pub in Milson Rd which we purchased for £1.25m, again there was a higher offer which didn’t get very far and we were given a window to do the deal. So at times this happens, other times the higher offer goes through.
Only last week we lost a pub in St John’s Wood which we were trying to purchase for a cheeky price of £3.15m, this was a 5,000 sq ft freehold property which was coming with vacant possession. The rest of the roads were all houses, as a house this property would be worth around £8m. That is not to say you will get a house, this would be perhaps a long drawn out planning game with the council taking years.
This is the nature of the game, all you can do is stay prepared with sharp lawyers and ready funds to do deals, in the hope that most deals get trapped in your net; some inevitably will get away.
At times we look at a property and when things don’t stack up we decide to dump the deal.
This week we decided to leave a deal which looked excellent on the surface, it was a building in Wimpole St which came up for sale at around £8m. It was made up of 8,000 sq ft which worked out to roughly £1k per sq ft. The building came with two lots of outside space one on the ground floor and the other on the lower ground. The building had a lot of character and is one of the best looking on the street. Prices on this road go to £1,800 per sq ft, so it was excellent value for money. Properties like this are a rarity, they hardly even come onto the market.
The property was made up of part commercial and part residential, with the commercial being for medical use.
What was odd and alerted us that things may not be as they seem was that the agents would normally do a planning report on this, in this situation they did not. This was the first issue, as conversion back to residential may not be as easy as it seems on the surface even though once upon a time this was a whole house.
Normally with properties of this size the agent usually has a deadline which you must have offers submitted by, we missed this deadline as we were still waiting for a response from our architect. So we told them we wouldn’t be able to make an offer by this time but we were still interested.
They mentioned they had a few parties in the same situation and not to worry they would still consider our offer the following week if we still wanted to go ahead and make an offer. This was a little worrying as normally a building this cheap would be grabbed very quickly. This meant others were also digging deeper.
Part of our due diligence is to get an architect’s opinion on properties like this.
In his opinion the chances of getting planning would be very unlikely. Hence after pursuing the building we dumped it. In his opinion it was very unlikely the local council would agree to give up the medical use of the building, as they had protected it.
There had been only one situation in his experience where this had happened and this was where the person applying had given another building for medical use in exchange for his one to receive planning for conversion back to residential.
This is only his opinion and there are possibly ways to get around this but it will take time and patience. Hence we let this property go.
Often clients think they do not have the means to purchase these kinds of properties. The way we operate is to make these kinds of deals available to the mass market, by breaking them up into small pieces.
The property market is like a triangle, the higher you go up the less buyers exist. So deals in strong locations are rarely available on the lower end which I would define at £500k to £1m. As you go up the triangle they become available. Our role is to make this level of the market accessible to the ordinary investor. They get a discount on a property which has a strong level of security due to the location, something they wouldn’t be able to access independently.
Haymills Estate, London, W5
Guide Price: £995k
- A large four bedroom detached house
- Three reception rooms
- Garden and off street parking
- Potential to build another property next to this property, subject to planning permission
Call us now to reserve!
Sow & Reap
A Property Investment Company
!Tips of the Week
Warren Buffett says: “Be fearful when others are greedy, and be greedy when others are fearful.” Right now the market is fearful due to a consistent rise in prices, so it’s a good time to strike.
Always take into consideration the projects which are happening in and around the area you’re investing in, this will ensure strong capital growth in the future.