This week we are looking at a deal in Fulham, a stone throw away from Charing Cross Hospital. The site comes with planning for three residential flats, along with commercial on the ground floor. The deal is off market, or so I have been told, for a little while before it comes on. Everyone knows the market is subdued, therefore, one cannot expect market price for sites.
The variables are higher for a development site than in purchasing a BTL property. If the current market conditions are uncertain, you will be adding even more uncertainty in with a site, as you are trying to predict the market at the point you complete the deal. There is an interesting angle to this deal, as far as the commercial element goes. There is a possibility to convert this all to residential. In very rough terms this means you double your resell value. In this scenario, you will be adding roughly £400k to the resell value.
Due to the unpredictably of the market, this deal is best done on a develop and rent model. With the aim of extracting most of your capital put in to the deal at the point of completion via a BTL remortagage. If this is the route, it’s worth revisiting the planning again to see if the rental can be enhanced.
The rental market is not prone to fluctuations in the same way house prices are. Therefore, it is fairly easy to predict the income this site will generate with accuracy. There are a couple of ways to increase the normal rental. One is to turn the flats into serviced apartments. This means your tenants could be staying in the property for as little as a few days. With the hospital nearby it would suit foreign patients who come here for treatment.
Another is to go back into planning and adjust it, so you can run the property as an HMO. Note, you do not need planning to convert a property into an HMO, just a license. It is, however, worth checking with the local authority to check the criteria, as there are two levels of legislation; a national and a local one. There are councils who make the process very cumbersome to execute, and even some who actively have a ban on HMOs as a consequence of over enthusiastic developers doing too many.
You could have a combination of the above, meaning an HMO which you use as short lets. We have arranged a couple of buildings like this already for our clients, which are being rented. The current technology allows one to gain entry using their phone. This avoids running around with keys all hours of the day. It pays to know in advance what you will be doing with the asset, as when planned properly it can be turned into a very strong yielding property.
The Wealth of Connectedness
We define ourselves as "human beings" not "human doings". This implies that our "beingness" is very important to us.
The 17th century philosopher, Descartes, gave us the maxim "Cognito, ergo sum" which means "I think therefore I am".
Thus, these two observations can be merged together by observing that what makes us unique is the degree to which we can think about our beingness. How we think about and pursue our happiness and peacefulness shapes us and drives us.
And at the core of this beingness is the degree to which we feel connected to others in a positive and meaningful way.
In business, especially the property business, it is easy for our connections and relationships to centre around property and money. This is especially true due to the transactional nature of the business.
We can lose our sense of relationships to others. We can isolate ourselves without even realising it.
As property people it is important to know how our material wealth will bring us happiness. My experience is that being without material means brings unhappiness. But beyond a fairly low point of material wealth, there is no correlation between wealth and happiness.
It is our connectedness and the quality of our relationships which greatly determines our happiness. What this has in common with property is that to derive such happiness we must "invest" in our relationships.
But the currency of such investment are such things as time, love, kindness and selflessness.
Q: What is a cannabis factory, and how do I spot one?
A: Most tenants will respect your property and the terms in the agreement. However, there are a small minority that will cause problems. Some problems are minor, and some are a little more on the larger scale, for example finding that your property is being used as a cannabis factory. The media will have you think that this is a common occurrence, however, in over 12 years in the industry I have only come across this issue once. They can be easily identified, as you will find green
plants everywhere, irrigation systems hanging from the ceiling, and lighting and ventilation fans within the property. That is all very well if you have access inside the property. Tell-tale signs from the outside are:
smell – it is strong and sickly sweet
you spot equipment such as lighting racks and ventilation fans being taken in
perhaps the windows have been blacked out or permanently covered
people coming and going at all times of the day and night
through a gap in the window you spot strong lights being left on day and night
constantly misted windows and signs of condensation
If you suspect that your property is being used as a cannabis factory, you must inform the police
right away, and refrain from tackling any of the occupants themselves as they are likely to be
criminals involved in serious crime.