Streetwise Property Alert 25th February 2014

With about 30 per cent of all enquiries received being about London and about half of those suggesting members have little or no real knowledge of the London market, we thought we’d talk about London today. If you are looking to buy into London read on…

My Little Joke

First things first, I occasionally make reference to the ’40 per cent off, 10 per cent yield brigade’ – meaning that members want us to source properties for them in London with 40 per cent off and double digit yields. Unfortunately, when I make this reference – which, to be frank, is a polite way of saying ‘halfwits’ – we get another wave of members wanting 40 per cent off, 10 per cent yields etc.

Let’s make it plain. Adam, our property finder, put it well this week. ‘Every agent I speak to inside the M25 says the market is red hot with a severe shortage of stock.’ What this means is that sellers do not need to give discounts – certainly not the 40 per cent off you might get for end of terrace tat in Middlesborough. Fact is, most properties go for asking price and higher in fast-moving areas (where sealed bids are not uncommon). Anyone who trundles along with the idea of ‘playing clever’, starting with a low bid with a view to slowly, slowly increases is going to get short shrift.

Put it this way. Adam, who many of you know, went to two ‘open house’ viewings over the weekend for a member. This is where agents invite people to come along during a one hour period. The first one had 60 people view it during that time and the second one had about 40 Both had offers by Monday in excess of the asking prices and both buyers are progressing immediately.

Yields? The average BTL yield across the UK is about 5 to 6 per cent. In London, it is less. We do a lot behind the scenes here especially for overseas investors. What they know – and are happy with – is that London yields are usually below 5 per cent, sometimes 3 or even 2 per cent. Of course, the upside is that you have capital appreciation like nowhere else in the UK.

Are You Funded?

I received an email from a member the other day which went something like this. ‘I might be interested in some of these starter BTLs you mention in London. I’m ready to move if everything is just so and would only need to sort my finances before progressing.’

Okay, clearly that’s not an email that’s sent by a serious investor who knows the way around but the biggest issue – that makes the whole thing a non-starter – is the absence of finance to proceed straightaway. It’s London. If you don’t have cash or funding lined up, you are going nowhere fast. Remember that property viewing with 60 visitors? That’s what you’re up against in many cases.

Do You Need Help?

I don’t want to turn this article into a huge sales promotion for Adam, who sources property for members, but if you do not have time and or skill to do the legwork, attend auctions (with all the know-how that requires) and negotiate with sellers, you need someone to help you in London.

As Adam writes, ‘I spent virtually the whole of Saturday checking properties and agents in Crystal Palace on behalf of one member and I hope it leads to something for him.’ Adam’s been a chartered surveyor for 25 years and knows where to look, what to ask – and what to avoid – for members.

You also may need some advice on what is selling at auction and what to bid for and, often as important, what to avoid. As Adam says, I was monitoring two lots for some old clients last week. The first, a parcel of land, was guided at £450k and sold for £580k! The second, a house in south London was guided at £350k and sold for £531k!’

It’s often said by many experts that most London deals these days go off-market. Again, you need to know what you are doing though. Adam adds, ‘Given the short supply of stock, I am extremely dubious when someone tells me a deal is off-market or below market value. Off-market does happen in the higher value stock where people like to be discreet and under the radar, but not really in the starter bracket, up to £500k, where vendors want every last penny.’

What Next?

Our Investing In 2014 seminar was judged a success but several investors, especially those who came along specifically to meet Adam beforehand, wanted some more one-on-one time. So, we are going to offer something less formal than a seminar – maybe a drinks get together or a curry night on a Thursday evening between, say, 6.30 to 10.30. Members can drop in and out of drinks as they please, talk to us and also to some fellow investors.

If this would interest you, drop us a line and we will tell you more. Given the costs involved and the fact that at least half who swear blind they’ll be there never actually turn up on the day, we will be limiting numbers to a round dozen for this first, trial, event and there will be a small charge for food and drink, at cost, probably about £20 a head. The know-how, expertise and access to exclusive deals – frankly, worth £1,000’s – all come free-of-charge.

Over to you, we look forward to your reply.

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