The property was advertised as attracting offers in excess of £2.85m. The property comprised of two flats and came with the benefit of planning permission for a mansard extension on the roof.
Planning permission has been applied for, but not yet granted, to turn the whole property back into one dwelling. It is envisaged this will be granted. Once the property is converted back to one house it will consist of 3350 sq. ft. and we expect a selling price, once decorated to a good standard, of £4.2m.
This deal was extremely time sensitive, understandably given it was keenly priced.
We had all of 24 hrs to do the exchange. Everyone was circling this deal like ants to honey.
The price was agreed at £2.625m and the contracts were sent over to our lawyers, as promised we promptly exchanged on the deal.
Prices for property can be ascertained by comparables, local knowledge is also required as comparables can be deceptive. Comparables are actual sold prices, however these could have been agreed three to six months ago. So by the time you see them they could already be out of date, especially in a fast moving market like St John's Wood.
In this situation we had a comparable which couldn't have been closer, it was next door.
This house was 3150 sq. ft. and was sold on the 7th August 2014 for £3.9m, valuing each sq. ft. as £1238. If we apply this number to our property you get £4.148m. Prices have nudged up since this time therefore it is allowable to assume an end value of £4.2m minimum.
We had previously done another deal on a freehold house in the area, this property was in Charles Lane, NW8. We purchased it for £1.81m and managed to resell it for £1.925m prior to completion. We made roughly £100k on £180k within a couple of months.
This property came with some bad press. It had originally been sold for just £1m by a 88 year old pensioner. The sale was made to an agent, who had asked what the pensioner wanted for the property, he innocently replied £1m would be great. The agent was on the property like a rash and arranged the lawyers for the seller as well to ensure the deal would be done quickly.
Rumour has it, that once the property was exchanged upon, it was resold for £1.6m to another party. But what burst the agent's bubble was when the pensioner mentioned to his neighbour - who happened to be a solicitor of all things - that he had sold the property for £1m. She was understandably livid and took matters into her own hands and managed to have the contract rescinded. In the meanwhile the poor seller passed away and so the property was later sold to us at the far more agreeable price of £1.81m as a probate sale which we still managed to profit from.
We're comfortable in the market in this area and are reasonably confident of reselling this property too prior to completion. We expect to achieve £2.9m - £3m within 2 months, thereby making an exceptional return in a short space of time, with little money used in the deal. The money used will be doubled within a couple of months.
The reason why we were able to close this deal very quickly was because we have a track record with the investors who came into this deal. One particular pair of investors are a retired couple who came to us to find a property they could invest in and hold on for their retirement income. We managed to show them there are more aggressive ways to make money by trading and flipping contracts, they were open to this idea and took consultation from their children who had a good background in property. On the first deal they earned £93k, on the second £40k and this is the third deal they have entered into with us which I'm sure will earn them a good lump sum.
They were very surprised when we told them they had earned £93k within two months on their first deal, and they actually did not believe us, until the money had hit their bank account.
Of course the past is the past and there is no guarantee this will be achieved - until it is. Therefore its prudent to prepare for the ‘worst case scenario’ which means completing the deal and doing the works.
This sometimes means you can sell the property for a fuller price. There are only two types of buyers in the market one is the investor the other is the end user. When we sell prior to completion we are very clear who we are aiming for, it's the investor. Why? They will see and understand the deal quickly, will understand the necessity for quick movement and will have their funds in place.
The deals are time sensitive and therefore we will sell for less than the market value to get the deal done quickly. However once we complete the time pressure has been removed and we have the leisure of seeking the highest price possible, we also open the door to the end user who is likely to purchase with more emotion and not logic, although take longer in completing the transaction.
The option of completing the deal and developing the property (without going into too much detail) is also a good proposition. Simply speaking there is a wide margin between £2.625 and £4.2m, about £1.5m.
Completing the deal will of course mean additional costs, for example stamp duty and arrangement fees. There is one saving grace in this deal, a quick look at the HMRC website shows multiple dwelling relief is still applicable to transactions. Here we are not purchasing one house, we are buying two flats therefore the stamp duty payable will be at the rate applied to one unit. In other words the percentage applied to £1.3125m will be applied to the whole property, not the rate applied to £2.625m. Using this relief will decrease the cost on this deal and will be a welcome relief given the recent hikes in stamp duty designed to milk higher value properties.
