We are currently preparing to launch a very lucrative deal in the outskirts of Cambridge. It’s a land deal, but land which has been allocated by the council for a residential led development scheme. It has been earmarked for this and there is talk of a station coming there, which will mean it will be a short journey into Cambridge.
The land is in a place called Soham, interestingly Soham also happens to be a Sanskrit word formed by two words: Sah (he) and Aham(I), these two words are combined to give Soham. Soham means my Individual Self is the same nature as the Universal Self, which may reflect its original pagan/vedic past.
Back to our land deal - in truth our focus has always been London. This is not something we would normally even consider, however the more we looked at the scheme the more it became certain this was a lucrative opportunity not to be missed.
A simple but important distinction was revealed to me whilst delving into this deal. That is it’s not property which rises in value but the land it’s on. This simple point is forgotten when dealing with property in London, as it’s rare to get a piece of land here which becomes an impossibility the closer you get to the centre of London. Therefore, you don’t pause to consider this point.
It’s easy to lose sight of the land and only see the property as rising in value. It’s the land which is scarce, not the man made buildings which happen to be on top of it. Buildings have a shelf life, even if it’s a hundred or even a couple of hundred years. Land does not. There are records of land ownership going back to the 13th Century. People have been investing in London actively for at least the last 500 years, and prices have been rising since then. The buildings may come and go, but the land carries on rising. It has been rising on the whole since then, of course there are peaks and troughs but on the whole the graph goes upwards. Even if we consider the last downturn in 2007, which was one of the worst in decades, property prices faired pretty well, they dropped to values which were prevalent a couple of years before the downturn and after a relatively short period carried on rising again.
Land is king, it’s what rises in value. If it wasn’t for this deal that we’re involved in, I perhaps would have forgotten to make this distinction.
This deal is a pure land deal, and consists of 3.6 hectares. This is something I also don’t understand, as my family even though from a line of farmers, gave up farming in the last generation. So I had to convert this to square foot which is something I do understand, it comes to 387,501 sq. ft. which in short is a lot!
The site has been earmarked for a mixed scheme which will be residential led. The minimum number of houses you can get on this land is 90 which allows for a lot of green space. The price of this deal is £3.5m which equates to £39k per house, based on a minimum of 90 houses being granted. With an end value of £325k the numbers speak for themselves.
The way to make the most money on a deal is to enter it in its infancy, in its gestation not when it is half or fully matured. Of course there are variables which are attached, however these can be neutralised by getting the right planning consultants and architects to look at this deal in order to get an informed opinion. Which we have done.
Pensions are interesting, you can set a scheme up yourself, these have become popular and are known as SIPPs, SIPP stands for Self Invested Personal Pension. You can put money into this and whatever money you put in you can do so tax free, meaning you get to reclaim the tax back if you have paid it already. In short the money is allowed to cook tax free until you choose to retire at which point you can draw it down. At this point you can get a portion as a lump sum which is tax free and then a stream of payments which is taxable.
There are limits on the amounts you can invest. What’s interesting is this type of scheme gives you control of your investment, you choose where the funds are invested, again with restrictions. Residential property is a no no, but commercial properties are allowed and here’s the point… so is land. Loans to property companies who invest into residential is allowed but not a direct investment into residential on an equity basis.
I met one shrewd investor who was doing all of his dealings through his pension pot, with the aim of taking the whole pot overseas at the point of retirement, at which point he would be able to take his whole investment tax free.
There is a raft of information which surrounds these schemes, and regulation when it comes to actual execution, but it can be done and you have control over your investment. We are already talking to interested investors who have this type of set up already to come in on this deal.
This deal is ideally set up to take full advantage of this structure.
The deal is open to those who have a pension pot and those who do not. We expect the turnaround time will be 12 months as a maximum and we expect the price of the land to increase to £6.5m post planning on a conservative basis.
This is a live deal, call the office now if you want a part of it.
