How easy is it to be fooled into buying a bad property?
Do you think it couldn’t possibly happen to you?
I ask these questions because I am stunned on a weekly basis by some of the properties that are bought for extraordinarily high prices.
Indeed, I was contacted at the end of last week by someone who had been given my details as a client of theirs is under severe financial pressure and needs to sell a house in prime central London very quickly.
The property can be acquired for probably £1200 per sq.ft. in an area where the average price per sq.ft. is closer to £2100. Indeed, this is a 70% reduction from the original guide price, so it must be a bargain, especially as it is in good condition.
Except that when I was told the address, I knew it was an absolute non-starter because it is one of the properties I have on a list I have compiled to show clients the sort of property you should never buy.
This is so bad, that even if you broke up the property into three or four smaller units, it would still be a risk even buying it at such a low price per square foot. In short, the configuration is dreadful and far too much of the property is subterranean.
If you have read my missives for any period of time, you will know that price per square feet valuations are a very blunt instrument and discounts from asking prices mean nothing – it is the discount to fair value that you need to focus on – so hopefully you wouldn’t make this mistake.
However, I look at the prices being paid for some properties at the moment and still shake my head in disbelief. These again are almost all in new developments or newly refurbished.
Now, for some buyers, having great security, lots of facilities in the development and the ease of just moving into an apartment that is ready is worth the premium. Indeed, there is a certain type of apartment where the scarcity factor means this probably makes sense financially too.
However, far too many buyers – especially, but not exclusively, international buyers – acquire properties in new developments and shoot themselves in the foot. Indeed, someone has just acquired an apartment in a truly average development for over £5,000 per sq.ft. when there are far better opportunities just yards away for 25+% less.
Does this mean that you should be focussing on properties that require work? Well, I certainly think there are far better opportunities, but you need to be selective. Buying a pig of a property is no good irrespective of whether it is wearing lipstick or not.
In short, buying a newly refurbished property is not a bad thing as long as the fundamentals of the property are sound and the premium isn’t too high. Unfortunately, far too many buyers are fooled into buying decidedly bad properties by shiny, modern finishes.
Likewise, don’t be tempted into buying a property just because the price per square foot seems very low.
And I know what I am about to say isn’t exciting – I really wish it was more cutting edge because more people would pay attention to it – but you have to ensure that you see all the best opportunities and remain patient and selective.
Otherwise how can you realistically expect to find the best property your money can buy and then acquire it for the lowest price possible?
Relying on the websites is not the answer… and yes, this is a brilliantly unsubtle bit of self-promotion! But I have dozens of clients who will tell you that it’s true:
“Jeremy did not send us many properties and we were surprised by one that he strongly recommended because the floorplan and details appeared unsuitable.
When we arrived, we were surprised not only by the standard of the building but also the apartment itself… I am not sure why this one hadn’t sold. I presume that other buyers had either ignored it because of the floorplan or missed it…
… Jeremy then handled the negotiation to achieve a discount to the asking price, so we now own an exceptional apartment that has cost us less than inferior properties have sold for in the same building.
Frankly, we would not have even visited this property and would have missed the opportunity if Jeremy had not been representing us.” Dr & Mrs Stelter (Marylebone)
So, if you are serious about acquiring a property in London but don’t have the time or expertise to find the best opportunities including off market properties and/or need advice on valuations and negotiations, would it be a waste of time have a 17 minute strategy session to discuss your plans?
Please note that this is not a sales pitch in disguise. I will not discuss the service I offer even if you ask. The focus of the session is to study your plans to highlight the expensive mistakes you are likely to make and, in many instances, I advise people not to buy property.
Would it be unreasonable to say that if you are planning to acquire a property worth over £1m, that just one idea from this session could save you at least £10,000?
Would that be a waste of 17 minutes? If not, simply email dee, my assistant, at [email protected] or call 02034578855 (+442034578855 from outside the UK) to request your strategy session.
