We have a property currently under offer, on the verge of exchanging if all goes well. The property is part commercial and part residential consisting of 6,700 sq. ft.; we purchased it in Dec 2014 for £3.75m.
We had an episode of squatters in the property, this was over Christmas, at a time when no one in the company was even in the country. On a residential property you can now call the police and they will evict them on the spot, however for a commercial property it’s not as easy. You need to go through the courts, there is an explicit eviction process which is the route we went down. I guess this is collateral damage of the property business, it happens time to time. I even heard rumours on the street it was orchestrated by someone who felt they were cut out of the deal when we were purchasing the property.
The sale price is £4.5m which gives a healthy profit in a short time. It’s located in Southwick Street, W2. It’s a property I know well, as we were based at number 31 for many years which is directly opposite this property, so I have been looking at this building for many years. The price we purchased it for was cheap equating to only £560 per sq. ft. for the blended value.
A freehold in this location at this price was cheap. We had a strategy for the property, four planning applications had been prepared and were being submitted bit by bit. The first one has been already approved.
The residential element consists of four units, we were looking to increase this to six units as well as getting planning to convert part of the commercial to residential.
The property was not on the market, we did not want to put it on the market until the planning permissions were in place at the very least. However word gets around and Central London is an incestuous place, and even though it hadn’t been put on the market it was quietly being punted around, we were given a strong offer which was hard to refuse.
One thing had always bothered me about this property, that was whoever occupied the commercial element had never done well, after a short while they left, they never made money whilst they were there. Call me a superstitious looney, but something was clearly wrong here. Even after we left our office a Malaysian restaurant had opened up which ended up in conflict with the freeholder and ended up closing, it was partly due to this situation we ended up purchasing the property cheaply.
The buyer wanted to see the property one more time before exchange, so we arranged a viewing. At this viewing I met my former landlady. I asked her why she hadn’t gone for this building, she said point blank that she did not like it, and then proceeded to tell me about a property which was opposite her house, which she wanted to purchase for one of her children to live in, as Indian parents do. However one thing bothered her and that is the last two generations of owners who had lived there ended up divorced and in conflict; this put her off from purchasing even though it was cheaper than market price. This swayed me on my decision to sell, and fueled my suspicions that we should not hold this property on a long term basis, even though it has a lot going for it in terms of the potential planning upside and the cross rail coming into this area in 2018, this would ensure the values increase in the foreseeable future at least.
The property is being sold through runners, someone who knows someone who knows the buyer. This is the way many deals are done in the market. I wanted to of course double check the price we are selling at so I asked one of the top agents in London to see if they could get me an offer, the highest they were able to come up to was only £4.3m.
As the property is held in a company the stamp duty is only 0.5% as opposed to 4% for a commercial building. The low transaction costs allow us to resell the building without a big dent in the profits.
This will allow us at least to move on to other deals, and recycle the funds. Planning is a variable and there is nothing confirmed, the buyers have been moving surprisingly fast on this, I was constantly being pushed to harass my lawyer to send all the information across. On this transaction the delays have been fully from our side, if we had the paperwork ready they would have exchanged in a few days.
On this transaction the buyers have agreed to release the 10% deposit to us on exchange, this at least allows us to have funds to secure other deals which we are working on and to keep the cart moving forward.
A similar transaction was done previously with the same investor, a pub was purchased for £1.25m and resold for £1.75 within a year, with the added benefit of planning for residential flats above. This is the easiest way to make money i.e. by adding value without getting your hands dirty.
Property is all about location, this is why they say there are three important factors to consider when purchasing property. If the location is superb then all other problems will be overridden. This is the third freehold block we have transacted on in this location. One was in London Mews W2 which was a site purchase of four mews houses, which at the time we overpaid for but due to the location has done very well and so has the investor; and the other more recently in London Street. No doubt here too in years to come this property will increase well in value.
The Real Deal
Marylebone, London, NW1
Purchase Price: £720k
- A beautiful two bedroom apartment on the first floor of a popular period mansion block
- Long lease
- High ceilings
- Low service charges
- Excellent buy and hold opportunity
Call us now to secure this deal!
Sow & Reap
A Property Investment Company
!Tips of the Week
Investing in bricks and mortar means the investment is real, hence it cannot simply disappear, like non tangible investments such as stocks and shares.
You can easily understand the incomes and expenses associated with property investment, the same cannot be said of many financial products.