Last week I was introduced to a pub in central London, which I was assured was a bargain. The price tag is £2m for a lump of building, which consists of over 4,000 sq. ft. This, on the surface, is extremely cheap.
We have had some experience with a pub just around the corner. We purchased this for our client, in 2013 from memory. At the time, it was a working pub, so we purchased this as what's known as a going concern. This meant, contrary to what we were being told by the sellers - who happened to be a major chain of pub owners - the deal would not attract VAT. This saved the hassle of paying a full 20% extra for the site and then having to claim it back later on down the line. The tenant of the pub was a nice fellow, but one who didn't always pay his rent on time. When someone is a little too friendly on your visits, by plying you with complimentary drinks, you should be suspicious; as there is no such thing as a free lunch. It was obvious he was preparing us for future irregular rent payments. Issues such as irregular rent payments are ground level issues; on a strategic level our plan was to get planning and sell the pub off with the benefit of planning.
Our architects advised for us to go for a pre app, and then follow with a full application. The idea of this is to ensure the application does not hit any posts when you submit it - that's the theory anyhow.
The application was smooth, both during pre app and full application stage. The property was granted planning for 9 flats, within 9 months. We were advised that it was not a good idea to get rid of the pub, as this would have been seen to be too drastic in terms of planning. A pub is seen as something of ‘community use’, personally I cannot fathom how a facility which enables a community to pour alcohol down their throats is of any help; it’s arguable that it is of detriment to the fabric of the community, but there you go.
In terms of planning we were advised to retain the pub, and ground and lower ground levels, and get the planning for the residential flats above. There was a possibility of getting planning for the pub, but we would have needed to demonstrate we had been marketing the pub for a tenant for a period of 12 months without success.
The planning came through, and we sold the pub for £1.75m at an auction, from a purchase price of £1.25m only 9 months prior.
Given this experience, and the fact it is the same council, I do not see why the same cannot be replicated on these new premises. In addition, there are significant comparative advantages to this site, in relation to our previous deal.
Firstly, you’re purchasing at £400 per sq. ft., which is extremely cheap. Although, this is not the way to truly measure a development deal. It merely gives you a crude indication. This property has outside space, and can be demolished, meaning it is not listed. Furthermore, it is empty, which potentially means there is a greater chance of a more wholesome conversion opportunity, without the need for VAT on the build. The deal is ready to be executed, and we hope to report an exchange of contracts on this site in next week’s article!
AGONY AGENT IS HERE TO HELP!
From time to time I am asked about the importance of a good internet connection, which may seem obvious but can be easily over looked.
In a world where going online has become an everyday occurrence for the majority of the population, expectations for internet and Wi-Fi access, as well as broadband speed, in rented homes have increased rapidly in recent years. In the past, internet access may not have been near the top of very many tenants' priority lists. Now, however, it seems to have become one of the more important things tenants consider before moving into a rental property. Some landlords provide internet in their properties, while others leave it for the tenants to sort out. Either way, it's becoming increasingly vital that tenants are given the best opportunity possible to have access to reliable, fast broadband, as well as being up and running in next to no time when moving in. Many private tenants are students - who require broadband or Wi-Fi access to complete their course work - while more people are now working from home, a scenario which again requires fast and reliable access to the internet.
How can you, the landlord, help? There are several views for and against you providing broadband access for tenants, but what’s most important is that whether you choose to provide it or not, you make sure tenants have the best possible chance of getting access to a good internet service quickly when they move in to your property. If you're looking to let to younger tenants, and the property you purchase is in an area with poor connectivity and signal, you'll certainly find it harder to occupy. It’s wise to check the speed of your connection as well as what type of broadband is available in your area. If the signal in parts of your property is poor this could be off-putting to tenants, particularly in a House in Multiple Occupation. There are a range of relatively inexpensive signal boosters that you can install which could help to generate an even coverage in the more far-flung parts of the property. If you choose to provide internet access you should make sure you get the best package possible and that everything is set up when tenants move in. Meanwhile, those landlords that don't pre-provide internet access must ensure that when tenants do sort out their broadband provision, everything is in place for a smooth and hassle-free process.
We are here to help and assist you with any questions that you may have, so, please do get in touch.
Richard Bond
Lettings Manager
