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Upside Down

31st March 2021

The deal I wrote about in Pinner, several weeks ago, predictably attracted many enquiries from people interested in investing; for three reasons: location, price point and development potential.

By location I don’t mean it is the most desirable location from the investment point of view, but it’s in the locality of where a high concentration of Gujaratis live.

The other two reasons are valid, however, the fact it’s on your doorstep should not be the criteria for choosing an investment.

Sure, it’s easier to manage the build and any issues that inevitably may arise in the process; but that is a ‘nice to have’, and should not be the criteria upon which you decide to make an investment.  The fact it was in Pinner became a disproportionally overriding factor.

Currently, we are in the midst of negotiating on a few deals.  All with a commercial element.  One particular one is in a very strong area of West London.  The property will be coming vacant, leaving the road open for us to use a little known process to convert it into residential.  The main issue as of August last year is one of light.  “Adequate light” is now a requirement of conversion, in cases such as this.  My understanding is this term has not been properly defined, and therefore there might be a loophole.

One of the great things about this property is it backs on to a very nice residential cobble stoned mews street.  A residential development to the rear would be in keeping with the scene of the street; it would blend in very well.

This helps with the sale and revaluation values.  You are likely to inherit the prevailing prices on the street, despite the fact you have converted it from a commercial property and the access is to the rear of the building.

The look and feel of the finished development will have an upmarket look and feel.

The deal is very sensibly priced at below £500K.

The additional benefit is what is seen as the basement, or lower ground, at the front of the shop turns into the ground floor from the rear of the shop.  Basement flats go for the lowest values due to the problems they attract such as damp and rats, especially in Central London.  This stigma which we will use to price the property low when we purchase will disappear when the development is completed.

The GDV, in my opinion, for the reasons given above would be circa £800K.  The finishing would have to be to a good standard, deserving of the location.

With these numbers it would be possible to hold on to the asset and refinance, thereby pulling out all your cost, and keeping the property for the future uplift.

This is a deal currently looking for an investor.

Suresh Vagjiani

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