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Distress Signals Attract Property Investors

March 18, 2009Article by Ray Withers

The new buzz in the property world is distressed property – but few people beside industry insiders ‘in the know’ understand what it is and how to find a deal. Distressed property is discounted UK property for sale at because the developer or owner is struggling to keep up loan repayments.

Often the owners are under pressure from banks or lenders to have the property repossessed.

Finding distressed property is not too hard if you know where to look – lots of property investment companies are offering houses and apartments at well below market value to avid buyers with cash in their wallets. New properties on finished estates that are not sold are one of the top sources of distressed property.

Because of the way developers fund their projects and account for sales, they need to build and shift property quickly to prevent debts sitting on the balance sheets – and until they have got the money in from one project, for many developers, it’s difficult to start another project. Developers are talking offers on UK distressed property – often with massive cash savings for buyers who are buying properties now for a fraction of what they were selling for a year or so ago.

Two typical discounted UK property deals are on the market with property consultants Property Frontiers, based in Oxford:

Merchants Court, Wavertree, Liverpool – this is an exclusive below-market-value deal with 30 two bedroom apartments at up to 25% discounts. The apartments are new and fitted out ready to rent and prices start at just under £90,000. Last year, identical property was selling for £135,000. Wavertree is a popular Liverpool suburb.

Merchants Court is a short stroll from the high street, station and top class sports facilities. The city centre is 10 minutes away by train. Gross yields here are expected to lie between 7% and 10%.

The Shrubberies Mews Townhouses, Streatham, London – this is another exclusive development of a small, gated community of just eight townhouses. The developer is offering a massive £75,000 on the certified valuation – bringing the asking price down to just £300,000.

The houses are open plan on the ground floor and have two double bedrooms and a family bathroom upstairs. Again, they are a short walk from local shops and stations. The City and West End is within easy reach by train. Gross yields of 6% at £18,000 per year are expected from the development.

Both these developers are selling at more or less the price of the land plus build costs to clear the properties from their books. Independent valuers have certified the property prices.

Author

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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