· PP:                        £0

· Fees:               £9,713.68

· Work Costs:         £24,560.10

· Total Costs:       £34,273.78

· End Value: £285,000

· Vendor’s cut: £220,000

· Profit: £30,726.20

· ROCE*: 89.6%

*Return on Capital Employed

The Property

90 Lydney Road is an end-terrace house conveniently located within a 5-minute walk of Southmead Hospital. It also offers easy access to Gloucester Road, renowned for its wide array of amenities, and is situated near major employers such as Airbus and the Ministry of Defence (MoD). The property’s prime location, with excellent connectivity to the M4, M5, and M32 motorways, makes it an attractive investment opportunity for rental purposes and an ideal starter home for professionals.

The owners, however, faced significant challenges as landlords. Their tenants had not only caused extensive interior damage but also failed to pay rent for nearly a year. When the tenants finally vacated the property, they fled to the Philippines, leaving the landlords unable to recover any compensation for the damages or the unpaid rent.

The Plan

With the bank threatening repossession, the landlords were under immense financial and emotional strain. They feared that a traditional sale would take too long or could potentially fall through. To provide a solution, we proposed an assisted sale. This involved first negotiating and agreeing on a purchase price with the owners. Once terms were finalized, we signed an agreement granting us control of the property.

With the agreement in place, we took on the responsibility of clearing the mortgage arrears and paying all subsequent monthly mortgage instalments. This step satisfied the bank’s requirements and gave us the necessary time to repair and refurbish the property before selling it on the open market. The objective was to achieve a sale price that exceeded the combined total of the agreed price with the owners and our investment, with the surplus serving as our profit.

The refurbishment itself was relatively straightforward but required disciplined cost management to maximize profitability. Our strategy focused on key improvements:

• Roof repair
• New Kitchen
• Update the wiring.
• Minor plumbing upgrades, such as replacing taps and radiators.
• Enhancing the property’s aesthetic appeal with new flooring and a fresh coat of paint.
• Furnish and stage the property before listing it for sale.

Exit Plans

1. Sell.  The market was enjoying a high level of demand at the time.  This made selling the most appealing option.

2. Buy-to-Let.  If the house failed to sell for a suitable price, we would have risked making a loss.  A back up plan of buying the house ourselves at the price agreed with the owners was therefore necessary.  We would could the let the house and sell it later.

 

Highlights

• Avoided property purchase, saving on stamp duty, finance fees and time.

• Completed refurbishment within 8 weeks for £30k.

• Achieved a sale price of £285,000 giving us a Return On Capital Employed of 90%.

Lessons Learned

1. Contract end date. Where possible, keep assisted sale contracts open-ended initially. If this is not feasible for the owner, negotiate a minimum contract term of 18 months. This timeframe should allow for at least two attempts to sell the property if the first sale falls through, as well as an additional six months to purchase the property yourself if necessary. If the contract expires before the property is sold, you risk losing both your investment and the time you have put into the project.

2. Double-Check Your Solicitor’s Work.  We hired an experienced solicitor to draft the assisted sale contract and oversee the eventual sale of the property. However, despite having agreed with the owners beforehand, the solicitor didn’t include a clause specifying that the council tax incurred during the holding period would be deducted from the owners’ share of the sale proceeds. Wherever we failed to inform the solicitor or if the solicitor forgot to include the point is unknown.  However, the oversight underscores the importance of reviewing your solicitor’s work to ensure all agreed-upon terms are explicitly documented.