The Perfect Buyer
15th April 2017
An agent, with whom we have done many deals, approached me with a property in W2. The property is a 452 sq. ft. one bedroom flat, on the fourth floor of a popular portered block. The property was priced originally at £500k. However, the seller has fallen on hard times and wanted to offload. After some toing and froing, the deal was struck at a low ball figure of £407,500 which equates to £901 per sq. ft. Prices in the block float around the £1,300 mark, and these are for properties on the first floor.
In a block, typically the higher you go the higher the prices. As this property is on the fourth floor it should attract a premium. Without even taking this point into account you’re getting a whopping 30% discount in W2.
Typically, the lower the value of the flat the less the discount. You cannot purchase much for £400k anywhere in London, let alone in a prime area of W2; at this price level you’re kind of scraping the bottom of the barrel. There are many buyers at this level, therefore, discounts at this level are hard to come by.
I pretty much knew who would purchase this property prior to even seeing the flat. The buyer has purchased and sold several properties in the same block through me. He viewed the property on Friday evening at 6pm and the deal was placed with lawyers over the weekend. We are hopeful for an exchange this week.
When looking at a property, especially in a purpose-built block, viewing the flat should not really be the deal closer. The numbers of the deal are most important, and where the market is going in the next few years. This is what should close the deal, when you see a flat all you’re seeing is a shoebox. Yet most are addicted to the act of seeing. Of course, there are subtle features which come through on a viewing such as how the light comes in, the noise from the street and so on, but these are the finishing touches, and not the main crux of the deal. This particular property is perfectly rentable as it is, at £400pw week which represents a very respectable 5.1% yield. This used to be the normal yield in Central London about a decade ago. Currently, yields for W1 and W2 float around 2-3% level.
We are looking at a flattish market for the next couple of years, therefore, it’s important when buying that you either have a discount or an angle to add some value. In this deal, you have three very strong features: the high floor, the entry level of the price, and the substantial level of discount you’re coming in with. Last week we wrote about our Westbourne Grove deal, which had a discount of 25%, as well as the ability to add another 40% of square footage, making it a stonking deal.