Umega Investments Off Market Case Study

  • slider
  • slider
by Andy Whitmey
April 3, 2017
Category:   Landlord, Umega

An Off market buy to let property in Canonmills

Here’s an example of an off-market property our investment team bought on Broughton Road to give you a taste of what we do for our investor clients.

We were approached by a new investor (let’s call him William) who had been recommended to us by a friend.  He had £140k to spend on an Edinburgh investment and wasn’t sure where to buy and what size….that’s where we came in!

Initial Advice – We’ve had a lot of success buying investment properties in Edinburgh at this price level in the past 12 months so we were able to advise William on the best location and style of property to purchase. The EH11 area of Edinburgh continues to perform very well (Polwarth, Fountainbridge, Dalry, Gorgie) and with all the improvements around St James Centre, areas around Broughton, Canonmills and the top of Leith Walk are very popular and should see good capital growth in future years (you can read more of my thoughts on this here). We agreed a specification with William to focus on 1 bedroom properties in these areas delivering a 6%+ gross yield.

Search – We spent several weeks searching the open market and speaking to off-market contacts about properties which fit William’s search specification.  We offered unsuccessfully for 2 properties in Fountainbridge which, although frustrating, was a good learning opportunity for William as he got a taste of what was available and for him to understand the merits of an off-market purchase.

A great Opportunity on Broughton Road – Through circulating this requirement through our agent contacts, we were offered a 1 bedroom property with an approximate valuation of £125k (no home report as this property was not being openly marketed).

  • 2nd floor property
  • 43 sqm
  • Open plan kitchen/living room, Double bedroom, Bathroom with shower
  • Gas central heating. Double glazing
  • No LBTT due as under £145k 0% threshold (ADS due at 3% on full amount)
  • Potential to improve kitchen, decoration and bathroom
  • Tenant in place paying £625pcm
  • All furniture and all safety certificates in place

The property looked perfect for William at a fantastic price. As he already had a good idea of the market from our searches he understood that this was a great opportunity.

Investigations & Due diligence – We carried out a bit of homework on the area and inspected 3 other available properties around Broughton/Canonmills to get the full picture of other properties that were available in the area (and levels of interest) to allow comparison.  Other properties in the area had been selling for £310-318/sqft during February. We also carried out further rental comparable searches to build our, and William’s confidence.

Offering – After a bit of negotiating we settled at a price of £123k which represented fantastic value for William. We were both delighted. For off market properties we tend to arrange a valuation of the property so a surveyor can give the property a once-over in terms of condition and value. In this case the seller organised this survey and the valuation that came back was £130k. As such the owner wanted to renegotiate the price. While a little disappointing, we realised how good a deal we had been getting! We worked further with the owner and went back with a final offer of £128k which we were comfortable was still way below what the property would fetch on the open market (£2k under valuation and properties were going for 10%+ over valuation on the open market). The owner accepted!

Working towards the completion date – While the negotiations were taking place, the tenant also served their notice to quit which presented the opportunity for us to look to increase the rent once we take ownership and the tenant vacates. The property purchase will be completing in April and in this case William used his own solicitor to complete the transaction rather than using one of our recommended solicitors.

  • At a new rent of £675pcm rent and £128k purchase price this represents a fantastic 6.3% gross yield
  • At £128k this equates to £277/sqft (anything below £300/sqft is very good). Compare this to other properties nearby (£310-318/sqft)
  • As the property was already let out it had all furnishings and safety certificates in place
  • The landlord is considering future improvements to the kitchen and bathroom to increase rent further

Since we’ve bought this property another similar property on Broughton Road has appeared online at ‘Offers over £130k’ which you have to assume could sell for upwards of £140k, considering the popularity of the area.

Our client is delighted with the result in this case and we’re excited to get another great property in a fantastic area to let and manage. Communication was key throughout this transaction, particularly with the deal potentially de-railing during negotiations. We’ll continue to work with William’s solicitor over the next 3-4 weeks until the deal goes through whn we’ll pick up the keys and all paperwork from the current letting agent to ensure a smooth transition following which we’ll get the current tenant checked out at the end of the lease and get the property on the rental market at the new rent. Result!

If you’re interested in buying a buy to let property in Edinburgh please contact [email protected] to arrange a time to talk through your requirements and to see how we can help you.


Leave a Reply

Your email address will not be published. Required fields are marked *