I really annoyed someone a couple of weeks ago.
He has been receiving information from me for about 14 months.
Then out of the blue he called to say that he had acquired a property, refurbished it and would one of my clients like to buy it?
Of course, I’m always interested in off-market opportunities so I asked for more details. Unfortunately, the property he has invested in is exactly the type of property I advise clients to avoid buying in London.
Now, it does have some good features – he appears to have refurbished it well, it is light and has a large terrace. However, it does have some serious negatives:
- The roof terrace faces north and won’t see a huge amount of sun
- The terrace can only be accessed via the master bedroom
- The flat is on a very busy road
- It is also above a pub
- The asking price would set a record for the street on a pound per sq.ft. basis (with the exception of one building that has porters and an amazing communal garden)
I was somewhat surprised that he had chosen such a property as I make it clear in my book, The Insider’s Guide To Acquiring £1m to £100m Property, that one should focus on “Best in Breed” properties that will outperform the market – this is true whether you are buying a home or investment.
So, I politely declined coming to visit the flat saying it wasn’t suitable for any of my current clients. The owner kept pressing me to visit saying that I might have a client in the future, which is when I pointed out that this was not the sort of property that I could recommend.
This is when he became rather annoyed. He rightly pointed out that not all pubs are the same and that it was stupid of me to rule out his flat for my clients on that basis. And it’s true, there are some pubs and restaurants which are nice, but even then such flats tend to underperform the market.
This also doesn’t take into account all the other drawbacks including the noisy road and the fact that the price he wants is ambitious to say the least. So, why on earth would I want to recommend this to one of my clients?
Of course, I didn’t say this last part to him and he may get lucky and find someone who is willing to overlook all these negatives because of the roof terrace. Time will tell. But relying on luck is not a strategy.
Two main goals when buying property
Irrespective of whether you are planning to acquire a home or investment you should have two main goals:
- Find the best property your money can buy
- Acquire it for the lowest price possible
Unfortunately, only a tiny percentage of buyers actually manage to achieve this which was highlighted in some research by Savills:
Between 2005 and 2013 the top decile of properties in Prime Central London increased in price 190% while the bottom 10% increased 63%.
This is the equivalent of buying a property for £2m and it being worth £5.8m or £3.26m. Would I be wrong in thinking that you might prefer the former?
Now, to be frank, you will not see 190% gains in every area and price range, but in every location and budget there are properties that will outperform the market. I call these “Best in Breed” properties and these are the ones you should focus on.
There are no guarantees – and as I mentioned the apartment above the pub may sell for a high price – but would it be a bad idea to stack the odds in your favour by acquiring properties that have a proven track record of outperforming the market?
Certainly, anyone who acquires this gentleman’s property for anything within 20% of the guide price will regret their decision.
How to avoid making expensive property mistakes
Hopefully, you won’t make such an expensive mistake when acquiring a property in London but if you:
- Don’t know the London property market well
- Are too busy to undertake the necessary due diligence to give you access to the best homes or investment properties
- Don’t have a clear understanding of what affects valuations in each street
- Don’t know which type of properties will outperform in each area
- Only rarely negotiate property transactions in London
- Simply don’t like dealing with estate agents
- Are unsure of how the mechanics of acquiring property in London work
- then you risk making an expensive mistake that will cost you hundreds of thousands if not millions of pounds.
Unfortunately, most people don’t know what they don’t know, but if you would like to discover what your blind spots are, you can request a complimentary Strategy Call with me, which is a diagnostic consultation to help you avoid the major traps, so that you can make an astute property acquisition.
If you would like to discover more, simply click https://mercuryhomesearch.com/strategy-call/, call 02034578855 (+442034578855 from outside the UK) or email my assistant at Dee@mercuryhomesearch.com to request a free Strategy Call.
p.s. Warren Buffett said ““It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” The same is absolutely true for property. To discover how to achieve this simply click https://mercuryhomesearch.com/strategy-call/, call 02034578855 (+442034578855 from outside the UK) or email my assistant at Dee@mercuryhomesearch.com to request a free Strategy Call.