We are in the process of closing a deal, this apartment is humongous at 2,185 sq. ft. This is not the size to purchase as a typical BTL investment; generally speaking, smaller is better. A colleague in the trade, who specialises in studios, commissioned a leading agent to analyse the occupancy rate in Central London of a studio, the report came back with a rate of 98.6%. In addition, the 1.4% of void periods was not due to the lack of demand, but because the property was being refurbished.
So why the interest in this large lump?
The location is superb, north of Hyde park which is due for a spurt in growth. This is backed by a Knight Frank report in late 2014, which confirms the clever money will go to the ‘poor’ side of Hyde Park.
Some people will always like to buy labels, they like the idea of owning a piece of Belgravia or Mayfair, they can then feel good about themselves and share this with others and gain their admiration. However, if the goal is to earn money then this is the place to invest.
So, the location is excellent, and location is the first mantra of property investment; and the future seems bright; but what about the present? What’s the discount? Comparable properties currently on the market range from £1,000 to £1,335 per sq. ft.
This property is coming in at £755, which is about 25% discount from the lowest price on the market and a massive 43% discount from the highest. Incidentally, in a new block in Wembley the prices are £778 per sq. ft. This puts this deal into some context, this property is in W2 and has far greater growth prospects and it’s coming in cheaper than market value from day one.
So, two points of the deal have been clarified, the location and the current discount to present value. The third point is the size of the deal, it’s simply not appropriate to purchase a large lump like this as a Buy to Let. The statistics point to small is better from an occupancy point of view, also if you look at the demographics, the family nucleus is decreasing, people are living in smaller units and as singles.
However, this deal can be broken into three flats very easily. It is being purchased with this proviso, therefore for this deal we are looking for three investors and not one. Each flat will then have an approximate sq. ft. of 728 sq. ft., which is far more rentable. The location will ensure a solid level of occupancy. We have bought numerous apartments in this block for our investors already. In short, you will be getting a retail investment at a wholesale price; actually, cheaper than wholesale.
Agony Agent
Each week, we answer a reader’s rental property question, from first-time landlords needing pointers about contracts to experienced owners. Agony Agent, is here to help!
Q: How can I ensure a smooth tenant check out?
A: Whether you’re saying goodbye to your perfect tenant or celebrating seeing the back of a troublesome one, you should always oversee the tenant check out professionally. You need to ascertain whether the property is in an acceptable state and, if not, how much of the deposit should be kept. If you produced a thorough inventory at the start of the tenancy then the check out should be fairly straightforward. Here are five things to be aware of.
1. Start early
A few weeks before check out, get in touch to remind the tenant that you, or a professional inventory clerk, will be coming over at a convenient time to check on the property’s condition. This gives them a chance to review their copy of the inventory and make sure that the property is still in the same good condition it was in at the start.
2. Reasonable wear and tear
It is important to remember that the property will never be in the exact same state as at the start of the tenancy. You can’t charge a tenant for the natural deterioration that happens to bits and pieces in every house. However, if something has been actively damaged, then that’s a different matter. If the sofa is looking a little grubby and frayed, then that falls under the heading of “fair wear and tear”. If you arrive to find one of the sofa arms falling off, that’s when you can charge them for it. If there’s a red wine stain, the best course of action would be to charge the tenants for a professional cleaning.
3. Ask your tenant to be there
It will speed up the process if your tenant is in the house, or waiting somewhere nearby, when the check out is being carried out; or allow an agent to handle this for you. If something was left in a condition that you consider unacceptable, it could be explained to them in person with the use of the inventory. If they disagree with your decision, a discussion could take place there and then. This is when pictures taken at the start of the tenancy could be very useful.
4. Wait…
…until the last minute to do the check out. It is advised that the check out is done on either the last day or the day after they have left. The property will be as empty as possible, limiting any unnoticed or hidden damage. It also ensures that the tenant has taken all their belongings with them. Definitely do not sign anything until the tenant has completely moved out just in case that final bookcase puts a hole in the wall!
5. Take time to assess damage
If you think you need time to assess any damages and the corresponding costs to clean, repair or replace items, take it. Get quotes from the relevant people and remember replacements should be ‘like for like’: you can’t charge for a plush new chair if they broke a bog-standard one. Nor can you charge them for a professional clean of the whole house if they only left a stain on the living room floor.
