Last week I was asked to see a number of new build properties in a prime location, they were discounted by 30%, which I found hard to believe.
It transpired the original buyers who were a middle eastern fund had made instalment payments of 30% whilst the properties were being developed. The recent oil crisis meant they would have to liquidate other assets which would lead to a bigger loss than not completing the property deal. They took the decision to drop the deal and forfeit the amount they put into it.
The developers took the decision to pass this discount on to the incoming buyer, wisely given the soft market conditions.
The comparables in this block confirms this is a bona fide discount. With the discount the prices are just below £1,000 per sq. ft.
These are great buy and hold deals, perhaps with the view of reselling in two to three years.
Another deal we have closed is a one bedroom flat in W1, cheap at £1,140 per sq. ft. What made this deal even more lucrative is the potential to short let the property. After visiting the block it became obvious the whole block was a short let haven, The freeholder himself owns a number of properties in the block and is doing the same. A short let means you are renting the property from a few days to several months, as opposed to a standard AST which requires a minimum term of six months.
With the rise of short lets and the dampening of yields in central London many landlords have pursued this method of renting with great enthusiasm, some purchase properties only with the aim of short letting in mind.
Most leases forbid short letting in their blocks, and some even ask for all tenants and ASTs to be vetted prior to them moving into a block. Clearly this block is not as strict, and this one point really opens the deal up.
This investment can generate over 8% gross as opposed to 3% gross, this means there’s cash left after the mortgage is paid - about £20k per annum depending on the mortgage details. And this is not where you make the bulk of your money, the bulk will be on the capital growth of the deal.
It’s a buyers’ market out there, and you can pick up some real diamonds. Hurry this window will not be open for long.
The importance of protecting your tenant’s deposit
The requirement to protect a tenancy deposit taken for an assured short hold tenancy in England and Wales was introduced on 6 April 2007, following its inclusion in the Housing Act 2004. Initially, deposits needed protecting within 14 calendar days of receipt by the landlord. This was subsequently changed to 30 days on 6 April 2012 as a result of the Localism Bill 2011. The legislation was introduced because the Government recognised many deposits were being unfairly withheld at the end of a tenancy. Introducing Tenancy Deposit Protection was identified as a way to raise standards in the lettings industry and ensure tenants are treated fairly at the end of the tenancy.
I remember a landlord being taught a painful lesson regarding this. He had a property which had been rented to a family that had lived there from 2006, with which he had never experienced any problems. However after a change in the tenants’ situation after a few years suddenly the rent was only being paid in drips and got later and later each month. After three months the landlord decided that this was not acceptable so he decided to give the tenants notice to leave the property. Notice was served and the end of the tenancy came, however the tenants decided that they were not going to move out. So the inevitable next step of court action commenced, and the relevant details were passed on to the landlord’s solicitor. After four months everything was all set and ready until the solicitor noticed that back in 2006, when the tenants moved in, that the deposit had been paid to the landlord as at this point in time it could be held by him, however when he had renewed the tenancy (after the new law had been introduced) he had not protected the deposit, so by law he would need to refund the deposit and then start the proceedings all over again! During this time the tenants did not pay any rent, totaling six months of rent arrears, and to top it all off the tenants then took the landlord to court for not protecting the deposit and the landlord was ordered to pay a fine to the tenants which was three times the deposit amount!
l Rent arrears £11,700
l Fine for not protecting the deposit £8,100
l Court costs £550
l Total landlord costs £21,550
l Cost of agent protecting the deposit £35-65 + vat
Make sure you do not fall foul of the law either by your own actions or by your agent letting you down. Contact us today to talk through your situation or any questions that you may have: 0207 993 4719.
