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Time to sow again

17th June 2017

A couple of weeks ago I went to see an elderly couple who had the fearlessness to invest in a BTL property a few years back.

They originally came to see me about a year before they purchased, expressing their intention to purchase something. Good to their word, they followed through; even though they are at a ripe old age, both retired and had never invested into a BTL property. They had the realisation that property investment was the direction to go in. This decision was taken for several reasons, namely to preserve wealth, and to make money in a safe and long term manner. The ultimate aim was to ensure their next generation do not have to scrimp and save as they had done; often this is the biggest factor amongst Asians for investing in property.

They agreed to purchase a property in St. John’s Wood, NW1. It was an ex council flat, and was the ‘penthouse’ of the block.  It was on the sixth floor of a purpose built building and consisted of 773 sq. ft. The apartment also had a balcony which stretched across the whole length of the flat, giving views across St. John’s Wood; only seconds away from Regent’s Park, and minutes from St. John’s Wood station.

The couple agreed to purchase the property blind, i.e. without seeing it. The purchase was done back in November 2013, at a purchase price of £585k.

Ex council flats in central London are great long term holds for two reasons: One, the lease tends to be long, and when an extension is required the cost is usually very reasonable.  Secondly, the service charges tend to be low. We have just closed a deal for a two bedroom ex council in Westminster, for £375k, where the service charge is only £600 per annum and this includes building’s insurance.

After three and a half years the value of this couple’s property is now £850k. A massive uplift of £300k. The return on cash is even more impressive. £200k was invested back in 2013 and it has more than doubled over a few years. And it is worth bearing in mind we are currently in a low point in the market. This property also generates a cash positive of £1,200 per month after paying the monthly mortgage. This gives the family a valuable income and also means the money invested is yielding 7%. The capital growth is in addition to the strong monthly return.

Having completed the deal, and experienced the strong returns, they have decided to take the plunge again, and reinvest. A good time to do so.

There is a one bedroom flat in Notting Hill which would suit them. It’s in the prime part of Notting Hill, opposite Kensington Palace Gardens, in a cul-de-sac.

The property is a probate deal, it will come with a 999 year lease on completion.  It requires some light modernisation. We are hoping to get it for around £530k; after the programme of works, I’m confident the property will value at £650k. In a few years I expect this property to have risen in a similar way to the previous deal in St. John’s wood.

Suresh Vagjiani

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