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Below-Market-Value Bargains For London Investors

February 10, 2009Article by Ray Withers

The irony of the UK property slump is the factors that fuelled the house price boom still linger but the market is held back by lenders making life difficult for investors.The truth is London is still a desirable place to live and work with an under supply of affordable homes and a ready market of keen tenants who are forced to rent because they can’t jump through the banking hoops to raise mortgages.

The potential for overseas investors who can take advantage of the weak pound is good – in the short term anticipated rental yield is excellent and inevitably, in the long-term, prices will rise again to give a good capital return on investment. Current low interest rates mean landlords are still making money from property in the UK – but now the cash is coming in from rents rather than capital appreciation. The market for new build property is shrinking as developers struggle to sell properties and cancel projects. London real estate is now a buyer’s market with a glut of properties that means a cash-rich investor has exciting opportunities to pick up homes at bargain prices – often for less than the cost of construction.

The Shrubberies Mews Townhouses , Streatham, London, is a development of two-bed roomed townhouses offered by Property Frontiers that fits this profile with:

Exclusive off market opportunity

* 20% below current market valuation

* Selling price well below estimated cost of construction/land purchase

* The developer in financial difficulties due to the current UK economic climate

The properties are 20 minutes from the City and only a short walk from a station and with easy access to all amenities situated on Streatham High Road. The development is eight mews houses within their own gated community, with manicured gardens and off street parking. Each house has open plan living space and cloakroom downstairs, with double bedrooms and a bathroom upstairs. The cost of each house is £300,000 – a huge £75,000 below-market-value price backed by professional surveyors Ludlow Thompson.

There are two main options for letting the property.

1. The traditional method of instructing a local agent to seek tenants and manage the property on your behalf. The agent who valued the properties felt they were highly attractive to let although he felt it may take up to two months to find good tenants.

2. The alternative management method is to let the properties via the local council. Property Frontiers are discussing this option with the local authority, who sign five year fully repairing leases. This strategy enables you to completely let go of the property for a five year period and have the house returned to you, having had any required repairs completed, returning the property in the original state.

Either way, the letting agent predicts gross yields of 6% at £18,000 per year. Finance is available at 75% loan-to-value (subject to status), which means investors can buy-in to The Shrubberies Mews Townhouses for £75,000 plus purchase costs.


Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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