The importance of presentation is widely recognised in marketing; in fact much of the money one pays for some goods is mostly for the presentation and the packaging and not for what’s inside i.e. the content.
Why when it comes to property do people often cheap out in the last moment; after doing all the hard work of paying fees, getting planning consents etc do they skimp out on the presentation of the property?
Developers of new homes often use a show home to help potential buyers to visualize what the flat could look like. On this basis they can sell thin air at a premium to what a nearby flat sells for. Recently New Homes At Savills sold off plan deals in Cambridge for £600 per Sq Ft when the average rate for flats in the city are only £400 per Sq Ft; a 50% mark up for something that doesn’t exist.
New developments spend a lot on marketing not just to help the potential purchaser visualize the property but to get them to buy into the emotional appeal of the development. For example the developer will go to great lengths to create an image for the kind of person who would be likely to buy in these developments.
Purchasers are not just buying into a property now they are also getting an identity for themselves; the property you can measure in price, but the identity is priceless.
Hence you can charge a premium and get away with it.
What’s more is with most of these new developers’ flats the flat you end up purchasing is only half as good as the show home they showed you when they sold the flat to you a couple of year ago, inevitably they come with a host of snagging issues to be addressed. The build quality tends to be poor on many of the mass build projects, cheaply done and very prima facie. I had a call only today about someone who had purchased a property for £600k in a new build development in Watford, he’s struggling with a leaky roof, cracks appearing and damp issues. He purchased it one year ago and paid a sweet premium to live in this new build property.
When it comes to property development, small developers often fail to capitalise on this important lesson. Many small and medium developers think they do not have a budget or visualization to present the property in the right manor and consequently make zero effort to do so; but this is simpler and cheaper than you may think. There’s a reason why when you go to a car show room all the cars look gleaming to the point they will never look like this again once you drive them out of the show room. It’s because first impressions count and a £20 valet will sell a £10,000 car.
I actually got the seed of this idea whilst working for an estate agent briefly in Paddington about ten years ago. I was introduced to a top performer at Foxtons who had smashed all the sales records in the branch in Notting Hill; that’s a mean feat in an aggressive company like Foxtons, and in an area as competitive as Notting Hill. He had then gone on to become a property developer in his own right, working on flats in and around the area.
When he purchased and resold a property he managed to achieve the highest price per Sq Ft ever sold on the street. He smashed all the ceiling prices ever achieved.
When I asked him what his secret was he simply said he had an interior designer to come and add the finishing touches to his properties which gave the edge on all others on the market.
This tip has stayed with me for a long while and has only recently fructified. When someone with an impressive track record gives you a nugget of advice, you keep it with you tight until the right situation presents itself.
Finally I will have a chance to put this important lesson to the test. We will be commencing a refurbishment of a large 1400 Sq Ft flat we have picked up in Kensington for £892,000 which has a share of freehold.
We had a designer study the property and come up with a design. In a flat it is important to keep the design internally in sync with the rest of the block, otherwise it will not be a holistic design. So at the very least you need to have someone to recognize the features and be able to replicate them in the inside of the property. Otherwise the property will not flow with communal parts.
We have chosen to use a designer in this property all the way down to the finer details to ensure the property is presented in the best possible light. This includes the flowers, mirrors etc and it will be fully laden with furniture in an attempt to achieve the absolute maximum. The aim here is to go all out and smash the record ever achieved in this block in terms of £ per Sq Ft.
There is a real gap in the market when it comes to presentation. The bigger developers have seen this and addressed it not only because they have the funds to do so but because they have the foresight to do so. The funds perhaps you cannot replicate but the foresight you can.
The property was purchased not simply because of the price or simply because it was a share of freehold but equally to do with the feel of the property. This property, though in a purpose built block, is fortunate to have three different aspects or view points, meaning plenty of light streaming into the property. In many block of flats you would be fortunate to even have two.
You don’t need to be a Feng Shui consultant to know with this much daylight coming in to the property you will get a good feeling in the flat.
The reception room in particular has windows in the easterly and westerly directions therefore you catch both the rising and setting of the sun.
The planning permission from the freeholder has been granted and the design scheme has been approved. All we are awaiting for is the builder’s estimate to come in which I know will be competitive. Then we will start work on this project very shortly.
The builder we are using is one of the main contractors for the Royal Freemasonic School for Girls in Rickmansworth. The reason why we came across this builder and why I insisted on using them on this project irrespective of whether they’re the cheapest is because I used to work for them many years ago as a laborer. I got to see first hand how they operate when no one is watching.
This is where it counts, as things can be smoothed over and your contractor may leave you with a beautiful looking flat but with time bombs yet to explode.
Their finishing is also second to none as many of the schools’ buildings are listed and the workmanship has to be to a high standard.
You may think a project like this is out of your range, but when you break the figures down it reduces substantially. When we analyse the above project there are two parts to it. First the purchase and secondly the refurbishment.
When we look at the purchase price of £900k (we’ll say £900k for simplicity), we need only 35% of this amount, as the rest will be provided by a lender. Therefore only £315k is required. The build cost which will be no more than £70k will be funded also by 50% this will mean you need a further £35k. This adds up to £350k; add stamp duty with legal’s which adds up to £40k. We are looking at £400k rounded up.
This means £200k each between two individuals as a joint venture, now an investment in a nice part of town becomes achievable allowing you to ensure higher returns and more security due to the location and type of investment.
Even if you have £100k we have investments to suit your budget. Call us now to see how we can make your money work harder for you.
Sow & Reap
A Property Investment Company
!Tips of the Week
When purchasing in auction always check the seller has held the property for longer than six months, otherwise you will have difficulty obtaining finance. Many of these properties are being sold by way of auction.
When purchasing BTL property always check the service charges, especially on new build flats, as these can dampen your rental income.