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  • Buy-to-Let

    How much discount achievable for cash buyer?

    Hi all,

    What's the relative discount I can except when buying a property in cash (instead of needing a mortgage)?

    I'm based in London with around 400k in the bank, which should be enough for a 1 bed BTL. I would think there aren't too many people in the same situation so it could work in my favour... or am I day-dreaming?

    Thanks for your advice!

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    You should definately get a discount for cash. we arent active in London market though as a favour i travelled down and viewed 2 flats for an overseas buyer and then helped him chip the price significantly because he was buying for cash.

    If i was active in London with current market conditions i would be viewing lots and putting in cheeky offers, I am reluctant to say a specific % to chip the price because you would need to do your research in the first to see if its sensibly or optimisic with its pricing, on something that been for sale for say 6mths at around £400k i would be wanting to sound them out with an opening offer around £330k-£340k. Alternatively if you £400k to spend, perhaps start looking at stuff around £500k.

    Good luck.

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    Phil Stewardson.

    Stewardson Properties.

    Stewardson Developments Ltd.

    Burson Land Ltd. & Jennings & Gilchreaste Ltd.

    http://www.stewardson.co.uk

    Follow me on twitter - @philstewardson

    Purely as a guess you may shave off a max 5% for a really desperate seller - but in central London the asking price may well be way down anyway.

    On a £400k BTL - SDLT alone will be £22000 

    Other investors on PT say they are doing deals at 20/30% BMV - but in current market determining true market value is very tricky - so it boils down to "discount from what starting point"?

    You could also look at auction market.

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    Wait till end of January and will expect many properties in London on sale. Already till date drop real terms over 20%, but more to come in the next few months when S24 huts home in January.

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    It's a funny thing with cash because it should be great but if the property you are looking at is sound, then morgageable buyers may put in more competitive offers and if the seller can wait it means nothing being cash.  

    I'm currently buying a property cash and did achieve a reasonable discount but it comes with problems that need resolving (no central heating and dilapidated).  

    My opinion is cash gives you more options on more opportunistic properties but head to head with proceedable buyers it counts for little.  

    I get the feeling with people who buy BMV is that they know the problems with the property or sellers and they lock-in their discount by knowing how to solve them cost effectively.  Good luck

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    I would think most vendors would hold out for a buyer paying more with a mortgage.

    But if you can find a vendor who is more motivated by speed of transaction than cash, you could get something significantly below market value

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    There are a number of companies who buy properties within 7 days at below market value.

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    Good advice above, I'm in a similar position and am looking to buy for cash. I'm comfortable putting cheeky offers in (written, with an explanation how I got the figures) to get things moving and sound out the vendor. First thing is work out if the asking price is realistic. I'm looking at something now. I offered £165k which was rejected, then offered £180k which was also rejected. Some calculations :

    £230k (asking price) ... my 165k offer = 72% of asking price, my 180k offer = 78%

    £200k (last comparable sale was £200k a couple of months ago so I discounted the asking £230 as unrealistic), £165k offer = 83% of £200k,  £180k = 90%

    £170k (I see £30k of work needed so 200k less 30k is a realistic price, not allowing for time & hassle), £165k offer = 97% of £170k,  £180k = 106%

    Depending on which figures you use, I offered 72% or 106% , and it's still £20k below what the seller will accept. Time to move on...

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    Many house sellers may be only marketing their homes every decade or even two decades - and will be well behind the curve of understanding the speed and degree of recent downturn - plus they need a certain min sale price to enable buying next home at a figure close to asking price.

    They will lack confidence and desire to get involved in equally hard negotiations on their purchase - eg where everybody in the potential chain heavily discounts their sale price.

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    Personally I would use the cash as a deposit for multiple houses and improve your cash flow and lower your risk.

    I have bought for cash previously but unless your looking to improve, devalue & then mortgage I wouldn't bother as AML rules it more painful than buying with mortgage

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