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  • Auction Tribe

    Tenanted properties

    Hey all,

    I've just come from the barnard marcus auction in London today when two studio flats in London went for 95k each (links below). They're both currently on assured shorthold tenancies - one of £710 pcm and one of £193 per week - altogether totalling £18,556 per annum.

    My question is: is this too good to be true? I'm remortgaging my property soon and will be receiving £50-70k depending on whether I go with a 65% or 75% LTV; could I really have bought both of these with 25% deposits and be earning an extra 1200-ish per month by Christmas, covering management fees and the two new mortgages?

    I've already been instructed by Vanessa that 'caution' is the anagram of 'auction' but I'm interested in thoughts on tenanted properties in general and whether there's something I'm missing here. This seems like a GREAT rental yield!

    Links:
    Lot 1
    Lot 2

    Thanks in advance!

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    Lot 2 looks like a converted garage

    Lot 1 - any service charges?

    Also, add in the auction costs & SDLT to get to the true purchase price / yield for your sums

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    There will be service charge, as per the lease (10-20% of the overall building/service charge), plus I see 200-250 G.R. each.
    Auction cost usually around £ 500, but need to read well the addendum hence some time the seller cost are paid by the buyer (usually 3%), and then SDLT @ 3%.
    Anyway, look like all in cost of 100K and yield of 8-10%, maybe 0.5-1.0% less after service charge.

    Not bad, but most probably studio of 20 sq meter.

    To the OP pay a LOT of attention to the fact that most of the Bank will not led vs Studio below 30 sq meter, hence is almost a cash buyer etc

    Hence at auction, if you buy in auction finance, you need in anyway to be sure is possible to get a mortgage, otherwise it can turn very pianfull, on top of asking a Solicitor to read the acution pack (BEFORE the auction).

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    Didn't know that about the square metre lending limit ... very interesting! Thanks!

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    I read about it, and saw it in other Forums.

    Said that ask your Broker for clarification, and see if any reputable Lender have appetite.

    I just wanted to warn you that is not straight fwd as a one or two bed btl etc etc

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    These threads may be helpful:

    26 questions to ask when buying a property with tenants in situ 

    Buying at auction - all that glitters isn't gold 

    Guide to buying a property at auction - Auction packs

    Worth noting that problem properties often find their way into auctions, so extra due diligence is needed.  I personally would never buy a studio flat for two reasons.

    1.  They can be challenging to finance.

    2.  They are not popular with owner occupiers, and therefore do not enjoy much capital appreciation, and may be difficult to sell on - hence these appearing in the auction?

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    This is all great stuff, thank you Smile

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