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The Right Advice Is Golden

We have today secured a block in Earls Court, it’s a freehold property containing 5 flats. It comes under the Royal Borough of Kensington and Chelsea. The property comes with the most important criteria box ticked, namely location. So important they said it three times. It also has some rare and beautiful features; most of the flats in the block have high if not exceptionally high ceilings. In addition they have access to a communal garden.

We have secured this block at a price of just over £1,000 per sq ft. This is due to the relationship and credibility we have built with the introducer who gave this to us.

A flat next door to this property has just been agreed at £1,400 per sq ft, so this is a very good deal. The flats require practically no work and are ready to be resold straight away.

This property has ‘trade’ written all over it, however one has to almost restrain himself from doing this too quickly.

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Prices will be lifting up come January, and if funds are returned too quickly what will they do in the bank? The answer is deteriorate in value. This is why it is important they are kept flowing. Still water begins to get stagnant and smelly, it needs to flow. The same can be said for funds; they need to be in property continually rotated with as little time as possible in the bank.

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This is why much of the money floating around the world is trying to penetrate into London property, though I believe there are two purposes to this. The first reason is NOT to make money but to keep it safe; much of the money finding its way to the London property market is coming from unstable or less stable countries than the UK, such as Indonesia, China and India. The fact this is leading to prices rising is in fact a secondary consideration for these investors. Typically they are the business people who are making a serious percentage return on their funds in their main business so a return of 20-30% doesn’t really excite them. But the fact that a bulk of their money is kept safely in another country altogether does interest them.

Consequently the property we are purchasing has a straight resale option even at £1,200 per sq ft, very easily. We will probably exercise a combination by reselling part of the flats for a quick sale and keeping the others perhaps past completion.

We have completely ignored the possibility of adding value through extensions and we do feel these exist, as the property has been in the same ownership for decades, and we feel the property has not been fully utilised.

This is one of the best value trades we have come across this year; not just in terms of margin, but also the location and the characteristics of the property. We have designed this as a low value investment, if you’re interested. This means you can invest with the security of a strong location and a solid discount in an otherwise unattainable opportunity.

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Prices will be lifting up come January, and if funds are returned too quickly what will they do in the bank? The answer is deteriorate in value. This is why it is important they are kept flowing. Still water begins to get stagnant and smelly, it needs to flow. The same can be said for funds ; they need to be in property continually rotated with as little time as possible in the bank.

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Without appearing to lose face they both agreed with me, once I presented them with the facts. Unfortunately they both were Gujaratis and both based in North London. The lawyers we tend to use are Jewish and in Central London, for their speed and knowledge; although they are not the cheapest. But then you pay peanuts and you get monkeys.

One of the clients involved in one of the transactions has been working with properties long before I. But they have trusted their lawyers to know what they are doing, and would never dream of questioning them. What they missed was the SDLT relief for multiple dwellings which refers to the purchase of multiple dwellings.

Relief is available where a transaction or a number of linked transactions include freehold or leasehold interests in more than one dwelling. Where relief is claimed, the rate of tax charged on the amount paid for the dwellings is set by dividing the amount paid by the number of dwellings. Subject to a minimum rate of tax under the relief is 1 per cent.

For example, I buy five houses for £1 million. £1 million divided by five is £200,000. The rate of tax on £200,000 is 1 per cent. The amount of tax due is therefore 1 per cent of £1 million, which is £10,000.

This would be a very serious mistake in this situation as such a mistake would cost in the region of nearly £150,000; and I am doubtful the HMRC will return the excess stamp duty in a hurry.

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Contrary to popular opinion about this time of year being quiet, it is actually proving to be a very busy time for us, deals seem to be knocking our door down. This is supposed to be the time when the property market slows down in the lead up to Christmas. It seems there are still sellers who want to sell but the normal level of buyers have decreased in the anticipation of a slowdown in the market.

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There are opportunities to come in as an investor into this deal and/or if you prefer the back end too, meaning purchasing the individual properties.

It is important to note this price is the current price, I believe the price will rise in the follow up to completion, which will occur probably in February of next year. There will be two forces pushing this current: one is the natural seasonal uplift of the property market which starts in the second week of January, the other I believe is another push in part created by the government help to buy scheme which will have a ripple effect on the property market. Furthermore when the mainstream press starts speaking about the uplift in the property market this leads to the population, like sheep, filling into the pen of property ownership like a self fulfilling prophesy.

   The Real Deal

Earls Court, London, SW5 Purchase Price: £1m

  • A beautiful two bedroom ground floor flat
  • Located on a prime garden square in Earls Court
  • This property will benefit greatly from the Earls Court regeneration scheme
  • Comparable properties on the market are priced at £1,400 per sq ft and above
  • This property is coming at around 20 per cent discount at around £1,200 per sq ft

Call us now to reserve!

Suresh Vagjiani

Sow & Reap

A Property Investment Company

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!Tips of the Week

When you are redeveloping a property to resell to an end user, make sure the property is finished to a very high standard. This will make the buyer emotionally attached to the property, to the point where money is a secondary consideration.

Time is also an important factor while selling a property, so don’t wait for the best price. Take a profit and exit the deal and you will be in a position to reinvest again.

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