An agent, with whom we have done many deals, approached me with a property in W2. The property is a 452 sq. ft. one bedroom flat, on the fourth floor of a popular portered block. The property was priced originally at £500k. However, the seller has fallen on hard times and wanted to offload. After some toing and froing, the deal was struck at a low ball figure of £407,500 which equates to £901 per sq. ft. Prices in the block float around the £1,300 mark, and these are for properties on the first floor.
In a block, typically the higher you go the higher the prices. As this property is on the fourth floor it should attract a premium. Without even taking this point into account you’re getting a whopping 30% discount in W2.
Typically, the lower the value of the flat the less the discount. You cannot purchase much for £400k anywhere in London, let alone in a prime area of W2; at this price level you’re kind of scraping the bottom of the barrel. There are many buyers at this level, therefore, discounts at this level are hard to come by.
I pretty much knew who would purchase this property prior to even seeing the flat. The buyer has purchased and sold several properties in the same block through me. He viewed the property on Friday evening at 6pm and the deal was placed with lawyers over the weekend. We are hopeful for an exchange this week.
When looking at a property, especially in a purpose-built block, viewing the flat should not really be the deal closer. The numbers of the deal are most important, and where the market is going in the next few years. This is what should close the deal, when you see a flat all you’re seeing is a shoebox. Yet most are addicted to the act of seeing. Of course, there are subtle features which come through on a viewing such as how the light comes in, the noise from the street and so on, but these are the finishing touches, and not the main crux of the deal. This particular property is perfectly rentable as it is, at £400pw week which represents a very respectable 5.1% yield. This used to be the normal yield in Central London about a decade ago. Currently, yields for W1 and W2 float around 2-3% level.
We are looking at a flattish market for the next couple of years, therefore, it’s important when buying that you either have a discount or an angle to add some value. In this deal, you have three very strong features: the high floor, the entry level of the price, and the substantial level of discount you’re coming in with. Last week we wrote about our Westbourne Grove deal, which had a discount of 25%, as well as the ability to add another 40% of square footage, making it a stonking deal.
Agony Agent
Each week, we answer a reader’s rental property question, from first-time landlords to experienced owners. Agony Agent, is here to help!
Q: Do I need to take references on my tenant’s dogs?
A: Whilst there are upsides to having a pet in a rented property, what are the downsides?
- Pet damage is not covered by insurance policies
- Allergies, infestations, damage
- Potential nuisance to neighbours, such as barking
- Could be a safety hazard if they escape and cause injury to a person or animal
Tips to prevent the risk
Ask the tenant about their pet - a guidance booklet from the ‘Lets with Pets’ website contains useful questions to ask them.
References: If there is a previous landlord, ask for references on these pets. If there was no previous landlord, ask for a reference from their vet (sounds strange, but you will not be the first person ever to do this).
Flats: If the property is a leasehold flat, check the terms of the head lease for any restrictions which would prevent an occupier from keeping pets. If there are no such restrictions, you would normally be entitled as a private landlord to allow tenants to keep pets at your discretion.
Deposits: Obtain a higher deposit; normally an extra two weeks is good practice, and have an addendum in your contract to tie them to a professional clean at the end of the tenancy.
“No Pet” policy: If you insist on no pets in the property you can include a suitable worded clause in the tenancy agreement saying that no pets are allowed without the Landlord’s written consent (or words to that effect). Be sure to confirm your “no pet” policy before the tenant moves in. You may end up losing the right to keep the tenant’s pets off the property if swift action is not taken.
What can be done if a tenant breaches the “no pet” policy? There are several ways you can choose to deal with pets in rental properties depending on how serious the problem actually is. If the tenant decides to keep pets such as a caged bird or small fish tank, the landlord may be happy to turn a blind eye, especially if you have an excellent tenant who always pays their rent on time.
However, if a larger pet like a cat or dog appears, the landlord may wish to take action. Try to have a peaceful discussion with the tenant and if the pet is acceptable, an additional pet deposit should be paid to cover any possible cleaning or damages.
If your tenant and you are unable to reach a mutual agreement on pets in rental properties, then it’s time to consider taking action to evict the tenant.
Obtaining possession if there is a breach
Based on the general advice from solicitors, a tenant would be in breach of their agreement if they introduced an animal that was not included on the tenancy agreement, but it is likely to be difficult to quantify loss and enforce against the breach. A landlord could in extreme circumstances apply to the court for possession but the judge would take into consideration the impact of the tenant losing their home versus the inconvenience of a pet.
Who knew something as cute as a puppy could create sooo much work?
Need help? Please get in touch.
