Tuesday 12 May 2015

No better time than auction time! – 8 tenanted units at bargain price in SW16

If you are looking for some good buy-to-let investments it doesn’t hurt to keep an eye on local auctions. Although in the past they have been mainly reserved for developers and projects to “add value,” more and more properties are coming up that are simply tenanted and are unable to be sold via normal estate agency channels.

This week I’ll be focusing on auctions and the properties coming to market in Allsop’s auction due to be held on the 28th May.

Let’s have a look at our first properties. Plural, that’s right as it’s a group of 8 flats due to go under the hammer. Don’t worry, if your pockets aren’t as well-lined as an oil sheikh’s there will be an opportunity to bid on them individually.

*You may need to register (free) with Allsop to log in

Lots 211-218 – guide price £2million collectively
Eight Leasehold Self-Contained Purpose Built Flats

   Each Flat subject to an Assured Shorthold Tenancy 

   To be offered either Individually or Collectively 

   Total Current Gross Rent Reserved


per annum (equivalent)

So what are we talking? A bunch of 2 bedroom apartments. Let’s assume they are in average condition – and I make that assumption because most are achieving an average rent. I would have thought anything in good condition would fetch around £1300pcm in that neck of the woods. It’s a good location, near to Streatham Station and it’s a nice 1960s looking purpose-built block. Valley Road is near to Streatham High Road so close enough to shops and the likes. Good long-term prospects.

So what’s it worth?? Well that’s for the would-be investor to decide. I’m thinking that the layouts will vary slightly, but for all intents and purposes the rent on all 8 COULD equal £115,000 per year if they were relet at current rents (you will see that some tenants have been in there for a good while now so the tenancy would require a review in order to get the maximum yield). If you spent some money on the decoration, bathrooms and  kitchens perhaps more like £1300pcm per unit which is nearer to £125,000 per annum. In order to decide how much you’d be willing to pay you’re really going to have to decide the minimum yield you want from the property and be prepared to walk away if bidding goes above that. At the current rents 5.8% yield would mean a maximum purchase price of £1,850,000 or roughly £230,000 per unit or thereabouts, but beware the guide is set higher – so you may find yourself bidding against seasoned investors looking to refurbish and add a bit of value, and perhaps even go for top dog rents. My advice would be to keep it nice but simple, Streatham isn’t Kensington & Chelsea (yet!) so it will be difficult to achieve ludicrous rents if you go overboard on gold taps and the like. However… http://www.rightmove.co.uk/house-prices/SW16-2EW.html?
Recent sales suggest that owner occupiers are paying up to £300k for these properties.

A good buy? At the right price most certainly. Strategy? Option A is to keep on to them, do nothing apart from a bit of decoration and perhaps push up the rents a bit. Refurbish to a good standard 5 years before looking to sell (or when the current standard of décor is not attracting good tenants). This will end up with a low-yielding property in the last few years of ownership, but frees up cash now for the cash yield to allow that expense. Option B: budget for full refurbishments now (approximately 15-20k per unit) and allow an exit price of £300,000 – see example here; http://www.zoopla.co.uk/property-history/12-beechcroft-close/valley-road/london/sw16-2ew/32705180 This would leave a likely maximum purchase price of £230,000 per unit to allow for refurb costs and selling fees in order to make a bit of a profit. Perhaps in the region of £30-40,000 per unit? Spend 1,850,000 plus 160,000 for refurb leaves a profit of around £200,000. Could be done in 6 months…

As always if you’re keen to pick my brain drop me a line on jeroen@xandermatthew.com or call me for a chat on 020 3397 2099.

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