Each week property auctions are taking place around the country, albeit currently with the restrictions imposed by the Coronavirus, they are being done ‘virtually’ and not in an often crowded hotel ballroom. Just few weeks ago we ran one of our weekly webinars to talk about what was happening at some recent auctions with Jay and Piotr and during the discussion they mentioned a sale via auction they had just concluded along with property developer Rod Turner.
This successful sale at auction is worth further analysis so I spoke with them afterwards to learn more about the circumstances of the deal, what had occurred and what lessons could be learnt from their experiences.
Piotr explained how they had acquired the property some eight months previously. “Last October we bought a row of freehold light-industrial workshops in Tooting, south London for £212,000 which were tenanted and producing just under £15,000 per annum in rent, so about a 7% yield. We did not buy them as a long- term investment
for the income but because we saw a planning uplift opportunity with permitted development (PD). So they were acquired at auction with the aim of changing the use from commercial to residential. The price we were prepared to pay was based on an assessment that buying it would still make sense, even if we could not get planning approval for the conversion to residential.
“Jay and I had spotted the lot in September while doing our usual weekend browsing of the upcoming auction catalogues. We tried to get a pre-auction offer accepted but the vendors were committed to selling in the room. While doing our research, we had identified an opportunity but also the risks that we would be facing: possible planning refusal, dealing with commercial tenants, possible re-letting of the property, and some possible construction issues.
“We knew that we wanted to do the deal but we needed someone who was capable of comprehending the risks and possibly contributing to it. Jay has a good background of dealing with commercial property, I had understood and dealt with a similar lot of my own before and we both could see a deal in the auction. Had we gone on to build it out then Rod Turner would then have acted in the project management role to oversee the construction.