This week we exchanged on a small deal on behalf of a client. What was interesting was the story around the deal. Of course merely doing the deal has a buzz to it as well; though it was a small one.
We were attempting to purchase this same property about a year ago, on behalf of another client. During the fag end of the deal being closed, the property was repossessed from the vendor, therefore the deal was no longer on the table. A frustrating situation as the buyer was ready and willing, and had spent a few thousand on this transaction, which had gone up in smoke. We managed to promptly source another deal for him, which he subsequently managed to complete on.
We know often failed deals tend to come back on the market; the boomerang effect I call it. This deal did not disappoint, however, there was an interesting twist to this deal. The tenancy was ‘unknown’ – perhaps to the administrators and therefore the market, but not to us. We knew this was an AST and therefore nothing to be concerned about, aside from the new reforms the government is trying to put into place.
This wasn’t the first time we had come across this scenario. Previously, we came across a freehold block of flats in West London. The property was on the market by the administrators as a consequence of a contentious divorce. All the ASTs were described as ‘unknown’ tenancies, we ended up purchasing the block for about half the price, and flipped it prior to completion.
This new deal was a blueprint of the previous deal, in fact it was more of a slam dunk deal, as we had known this deal more intimately as we had been involved in most of the conveyancing.
What’s interesting is the property was offered to us the day before, which is unusual in itself, as administrators prefer it to go to auction for transparency reasons. They must have been desperate. We took the decision to purchase on the auction date and consequently got a £5K discount. It could have gone either way, it was a gamble – which paid off on this occasion. The property has been purchased with about a 30% discount to the market level, unusual at this level.
The deal is also situated in a location which is still maturing, we believe there is a lot of growth to be had in this spot. Much has occurred and there is more to be had.
Now the deal is in hand, the next step is to complete it within the auction timeframe. Once this is done, the next challenge is to extract the discount obtained, so that there are no cash funds left in the deal.
We are also tracking a couple more live deals in this location. If the above is of interest, do get in touch with our office now.
