Tuesday 18 August 2015

Everyone likes the lowest fruit in Clapham

Oh that looks great, an easy purchase. The property looks fantastic, in good order, modern kitchen and bathroom. Every tenant that walks through the door will be stuffing pound notes down my trousers to entice me to rent it to them. Well guess what, an easy life comes at a price.

How often have you looked at a property and thought "oh that's a developer jobby, they want premium money for their refurb." Guess what, they do - because they want to get paid for the time they slaved over designing, executing and paying for the refurb!

It's really easy to say "no" and want to do it yourself and save yourself the premium in the purchase price. However... time is money. You end up buying something (be it to live in or for investment) and you will have to...wait for it... spend more money, delay the move-in, put up with builders, spiralling costs, etc etc... If you are letting - time is money, and you can't charge for yesterday's void! So you should really consider a "finished" project so that you can let it quickly. If you are able to negotiate a few dates and times between exchange and completion you may even be lucky enough to let it without a void, straight from completion!

Sound good yet?

Picture this. A "finished" property costs £300,000. A property in need of work will cost you £275,000 and you reckon you can do the work yourself by doing a bit of painting and getting your mate Bob the Builder in. "spend 10k max" you reckon. You know by the time you've bought the place, got the keys, waited for Bob to fnish another job you're already two weeks in. TWO WEEKS... void, gone, forever. Anyway, work commences and you overrun. Two week job takes 4 weeks. total of 6 weeks' rent down the drain. As you are a savvy investor you based your figures on a weekly rent of £375pw. So you've just lost £2,250. Ouch. And Bob? Well, he found some bits and pieces he wasn't expecting, and you had to work a lot so you had to pay him to paint the lot too. he cost £15k in the end. so you had to stump up £55k (20% deposit) plus another 17k for the void and the works. Total of £72k and change, ignoring legal fees and stamp duty.

You would have stumped up £60k instead for an immaculately finished one in the same block. You've just wasted £12k. Savvy investor ey? Think again.

Paying a premium sounding pretty attractive now?

If you're selling or letting your property it's important to have it look its best. Tenants crave something that isn't "average." Listen to me when I say magnolia is for the boring. Get a touch of wallpaper up, something to differentiate yourself from the laminate floor factory type flats of years gone by. Spend a bit of money on the right things. Ultra super duper fancy boiler that can heat water in a second? Nah, not selling it to me. You paid 10k for it? no thanks mr. landlord, I'll go with what looks pretty, pristine and new, thanks. Wallpaper costs nothing, neither does a funky glass splashback in the kitchen. Not compared to the void. The boring will receive their punishment in lower rents and longer voids and lower rental yields. Nobody wants boring. Well, not at a premium price of course.

So, the easy option is actually the cheapest when buying. Pay someone to do the work for you. Pick the lowest fruit. This is often the cheapest fruit!

If you're looking for buying, selling and letting advice pick up the phone and give me a call. Happy to talk. Or if it's easier drop me a line on jeroen@claphampropertyblog.com.

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