Last week I went to see this property in Lansbury Road, EN3 which is up for auction tomorrow.
It’s advertised as a two bedroom ground floor maisonette, with lounge, separate kitchen, bathroom and back garden.
You could tell immediately that this flat had been one families home for many years, not only due to the fact that the fixtures and fittings likely dated back to when I was a child but also because the nicotine build up on the walls was like nothing I’d seen before!!
Looking beyond the aesthetics, this is a good space though. Bathroom, kitchen, lounge and the main bedroom are all good sizes and the garden is very low maintenance hard-paved with a high fence. The second bedroom is a little more confusing as there is no door and only a half-wall separating it from the hallway. A little confusing but easily sorted out.
These are decent flats nothing too spectacular but ordinarily in good condition they would cost around £260,000 according to Zoopla, and rent for around £1,150pcm. That’s a gross yield of 5.3% which is perfectly respectable.
However this flat has a guide price of just £95,000!!
Auctioneers always say that the guide price is generally within 10% of the reserve price (the lowest acceptable price to the seller). So if the flat goes for £105,000 (that’s a big IF) and you add on £25,000 to completely gut and refurbish the flat, it would give a total cost of £130,000!! That would mean a yield of 10.6% which would be fantastic or for a quick flip that's 100% profit almost overnight!!
But hold on, there’s got to be a catch hasn’t there?
Absolutely, and in this case it’s the lease which is a very scary 29 years – yikes!!
The first problem would be getting a mortgage, or rather not getting a mortgage because at 29 years the lenders will run in the opposite direction! So cash buyers only please! And then assuming you have the cash, how much would extending the lease cost? Well I’ve spoken to a couple of experts and think a figure of around £75,000 is realistic.
Add the £75,000 to the £130,000 and you have a new total of £205,000. That would give a yield of 6.7%, and an increase in value of £55,000. That's still very nice for a few months work, thank you very much. Of course you might be thinking that instead of extending the lease you should just buy the freehold, more control but of course more of an investment.
All in all I’d say this little property may be a not too shabby investment for someone but as always a lot will depend on the actual figure paid at auction (I think £105,000 is very optimistic!).
Let’s see what happens tomorrow……….!
