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Just What Is A ‘Distressed’ Property?

March 26, 2009Article by Ray Withers

If you are looking to cash in on some ‘distressed’ UK property , at the top of your list is some definition of what actually makes a property distressed. Professional property investors are applying three arbitrary tests and a property has to tick all the boxes to pass.

The tests are:

  • Nothing other than minor refurbishment work is required on the property
  • The gross yield should start at 6% per year
  • The buying price is at least 25% below market value

If the property fails one of these tests, then move on, because the UK distressed property , market has plenty of other options that will tick all the boxes on offer. Lots of investors who have not got the time or inclination to search for below-market-value property himself or herself are using newly set up distressed property companies or a property consultant with a more established background.

One such consultant company, Property Frontiers, based in Oxford, has a choice of discounted UK property , that fits all the criteria for a viable below market value UK property investment:

Merchants Court, Wavertree, Liverpool

An exclusive below-market-value deal of 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 apartments in the same block were 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.

As brand new developments, buyers can be confident that despite a little snagging, no further costs are involved in bringing the properties up to scratch for letting.

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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