invest in property - Case Study

A senior expatriate director of a major oil company, living in the far east, recently instructed us to acquire a number of residential properties for rental investment purposes.

He has three daughters in their late teens or early twenties and thought he might buy a property for each of them to eventually inherit. He expects to retire and return to live in the London area in five years' time. During two initial meetings, we discussed various options and agreed to seek out for him three one-bedroomed apartments in the suburbs of London and one two-bedroomed apartment in Central London. We also established the amount of his own capital which he would want to invest in this project.

He provided outline information of his financial position to enable our mortgage advisers to obtain a "decision in principle" from one or more of panel of lenders offering competitive "Buy-to-Let" mortgages. The advisers subsequently prepared the formal mortgage application form, and sent it by DHL to the client for final approval and signature.

We then commenced our search activities and after two to three weeks of work in the field reviewing potential properties (and rejecting a high proportion of them), we prepared a shortlist of four suburban properties for him to view on his next UK visit. Of these four we offered on two and agreed on one at some £3000 below the asking price (thereby re-couping our search fee and more besides!).

We then introduced solicitors, arranged access for the surveyor/valuer, and made plans to furnish the property as soon as exchange of contracts is effected. We shall then offer the property for letting and expect to achieve about 8% gross rental yield, which reduces to about 5.5% net of property-running and letting costs. This will be sufficient to meet the monthly cost

of an interest-only mortgage at 5.99% on 65% of the purchase price, and leave a surplus of about £100 per month. The client will have the option of converting to a repayment mortgage after the 3-year fixed term of his mortgage expires. With annual rent increments adding to the accumulating surplus, capital repayments can then begin to be made from this point on.

The same principles will apply to our work in locating further properties both in Central London and the suburbs in the coming weeks, with the client being kept informed but without having to be on-hand or involved in every decision. We have gained the confidence and trust of the client to the point where he is able to instruct us to proceed with the acquisition, preparation, letting and management of this and other properties.

If you would like us to act for you in a similar capacity, please contact us in confidence our Acquisitions Manager, Mark Horak, B.Sc., MRICS. He will be happy to arrange an initial meeting, to discuss your requirements.

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