28th July 2018
Last week, I took the trouble to go down to Battersea to check the local environment of a small deal we are about to do, on behalf of our client. You can do a lot of research without stepping foot in the locality. However, we are in a market which is in a state of flux, and therefore, it’s not so easy to unearth what’s going on at ground level from the comfort of one’s chair.
Coincidentally, the first agent I walked into was the one who was previously involved in selling the same apartment we are purchasing. Initially, one always approaches such meetings with a healthy dose of caution. So, initially I acted as if I was looking to invest.
Very quickly, we got to the real point of the conversation, and pulled the cat out of the bag. It transpired that the deal I was interested in had a high offer initially, but then the deal went sour once the buyers couldn’t get their head around the issues surrounding the freehold.
Given the situation, the agent advised he could get £415k for this property, as is, with the issue of the lease extension. This gave me the right fuel to go back and ‘chip’ my seller, as he put it. Though this was never the intention, sometimes, as a deal progresses, more information comes out of the woodwork, and the price needs to be revised accordingly.
There were two main issues which popped out. One, was the local market and the information we gathered; and the second, was that our lawyers advised us the company which owns the freehold could not simply be reinstated. This is what we were hoping to do. The idea was to acquire the freehold for a couple of thousand pounds.
Now, we will need to purchase the freehold from The Crown, at market value. This dampens the deal. Dampens, but still doesn’t break it. And, I’m quietly confident this will be a lucrative deal given time.
The location is enviable. It’s surrounded by the green spaces of Clapham Common and Battersea Park. It’s surrounded by several stations, which means there will be little issue in terms of rental.
Although the price was lowered with the sellers, they made up for it by pushing back in terms of time, i.e. the deal has to be exchanged today (at the time of writing), and completed within 28 days. This doesn’t cause any downside for us.
We will need a complete refurb on this property, in order to rent or resell. Our immediate reaction is to prepare it for rentals, rather than resell, given the soft market conditions.