It is rare when dealing in Central London property there exists situations where you can add value, in terms of extra square footage. Perhaps you can get a chance to add a basement or the odd loft space, but this is as far as it will go. The opportunity to develop wholesale is very rare.
The secret to making money in property in this location is in the purchasing, you need to purchase cheap. This is done in two ways; one is to look for property cheaper than current market value, which at the lower levels is harder as there are more buyers at these levels. The market in London is little like a triangle where most of the buyers are at the lower levels and as you go up in price there is more room to breathe and deals start to become more plentiful. The other is to purchase in the right market, ideally just before it rises, when most people are still sitting on the fence. A good time to have done this was in late 2008 and 2009. It could be said if you had closed your eyes, and bought anything during this period you would have made money, due to the uplift since then in prices.
The reason why there are so many buyers circling for deals in London is because everyone else is, in other words there is so much demand that prices rise naturally. When a down turn comes this segment of the property market is least effected, and more resilient to a down turn in price.
At times you become a little blinkered with working in this locality, rather like a horse. It was refreshing to meet someone who deals in property throughout the UK, apart from London in fact he hates dealing in London due to the characters involved. It is a dirty game, due to the sums involved people’s lower natures are brought to life. Seemingly ordinary folks are turned into two faced liars and scammers when it comes to property dealing, some even think this is the only way to do deals, so ingrained is their behaviour. There are many ways to deal with this, one is of course to walk away, they may have got one over you in terms of the deal, but they have lost the relationship which actually has more value on a long term basis. The other is to tackle them using legal means, however this means you must have sufficient grounds to attack. Verbal agreements are difficult to substantiate. However you may then find yourself in a situation where two people are milking you, one is the person who ripped you off and the other is now your lawyer, where invoices start to come in thick and fast. Often the illusion is created where they are acting to protect you, but often it is themselves they protect first and you second. Welcome to the property world.
I met an old boy he'd been involved in various things property being one, introduced through a mutual contact I have known for several years. We met in a pub in Uxbridge, he avoids doing deals in London like the plague. He notices people in general become more honourable the further you get away from London, where you can still do things on a hand shake and a verbal agreement.
He has access to sites around the UK, where there is opportunity to add value in various ways. It was actually an eye opener for me, being stuck in the London market means you only develop the tools to help you transact in this little niche. There is a whole other world opening up.
He was uniquely placed to access these sites due to his connection with the travellers or gypsies, which spanned three generations. Things were done on a hand shake and nobody goes back on their word.
What I liked was the low deposits which could be put on a deal and the long completion dates which were being negotiated. For example there was a site which I got taken to the following day, which looked derelict and had commercial sheds on either side. I wouldn't know what to do with this site. However I was reliably informed this site was in high demand for car parking space, this was a symptom of the expansion of Heathrow airport. Being brownfield you could pretty much do what you want with it as long as it was commercial in nature.
This was not the only angle. I was asked to look at the floor, I saw only stones and granite but my contact saw gold. Granite had a price of £85 per truck I was told, and there was estimated to be 1000 trucks on the ground, this meant £85,000 in total. This would equate to a big dent in the purchase price of the land which was quoted at around £250,000.
The resale on this piece of land post planning for car parks is well in excess of £10m, of course this would be subject to planning, but given its brownfield it didn't sound like it would be an issue.
These days I only start the serious due diligence once I know the contract is with the lawyers, as it costs time and money to do so. It is a little back to front, but there is no point doing all the work and then finding out that the deal cannot be delivered. There is always more talk than action, therefore when the contract is received work will commence. I had a scenario where we did the deal on the basis the seller had an option agreement to purchase a freehold deal in Hatton Garden, it later transpired the agreement didn't exist. When after we got all the papers and asked for this agreement we got two different versions of the story, the so called seller said it was more of a verbal agreement, and his lawyer said it does exist but they didn't want to show it.
On the basis this agreement existed we agreed a fee for the seller with the option agreement. So now we blew the deal out.
