OVERVIEW - Case Study by YOUR PROPERTY AUCTIONS
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Your Property Auctions is run by Jay Howard and Piotr Rusinek, property professionals based in London. Both have strong property sourcing and investment background. Their model is to purchase property at auction below market value and either resell or add value and then resell. Jay and Piotr are the authors of the Amazon No. 1 Best Seller
‘Before The Hammer Falls: The Insider's Guide to Property Auction Success’
. With their experience in the auction field, their network of professional contacts and their access to opportunities, they are uniquely placed in the marketplace, to be able to identify and execute opportunities at auction.
PARK AVENUE MEWS - TOOTING, LONDON
Freehold row of 4 commercial workshops in a predominantly residential area, purchased at auction with a view to adding significant value.
We purchased the Tooting deal at the September 2019 Harman Healy auction for £212,000 and after some expected competitive bidding, secured the asset with an income of £14,700, which represents a healthy London 6.93% yield.
Our primary exit strategy was to obtain permitted development for change of use from workshop to residential conversion to provide 3-4 houses. If successful we would either sell with the permitted development back into auction or apply for stage 2 planning and again, either sell at this stage or proceed with the development.
We received notification of our grant for prior approval on the 9-1-2020 for creating 4 x mews houses.
Based on local sales and £ per square feet, we have projected a GDV of £1.175M in the current configuration.
Our secondary exit, if the permitted development was refused, would have been to re-gear the commercial leases, aiming to secure FRI Leases for each of the units for 5-7 year terms, at a market rent producing approx. £25,000 per annum. Based on this projected figure the workshops should sell in excess of £300,000 in a more suitable auction (with only paperwork value added), whilst generating a healthy 7% yield in the meantime.
We considered this the worst-case scenario for the project.
FINANCIALS Purchase price: £ 212,000
Legals: £ 1,800
Legals for serving notices: £ 1,440
Stamp Duty Land Tax: £ 1,240
Planning consultant fee: £ 1,200
Measured surveys: £ 800
Prior approval app fee: £ 100Total costs: £ 218,580
3 x 1 bedroom mews houses (approx 40sqm each) -£275,000 x 3 = £825,000
1 x 2 bedroom mews house (approx 50sqm) - £350,000 x 1 = £350,000Total GDV £1,175,000
Estimated costs of conversion: £275,000
Total costs including purchase: expected below £500,000PROFITS 1. Expected profit if built out: £675,000
2. Expected profit if sold now with planning: £350,000 to £400,000
All of our auction purchases are bought with multiple exit strategies planned in advance. This is the de-risking, risk mitigation and risk management approach we always take in order to create successful and profitable transactions at auction.