Help please! FTB looking at buying undervalued, repossessed flat

-Zigo

I rented a flat for 2 years from 2010-2012 in the old (now converted) Salford Royal Hospital, 15 minutes walk from Manchester city centre. I loved it but was given my notice because the receivership company wanted to sell it to help clear the owner's debt (faster than my rental payments).

It's now on the market for sale. I think it's very undervalued because of the need to sell quickly to clear the debt. My gut feel is that I could buy it, spend a couple of months improving it slightly (e.g. clean better than I did when I left, replace laminate floor with carpet, etc.) and then re-sell in the summer at a significantly higher (natural) price to make an easy profit.

I'm wondering if anyone (especially those with expertise in city centre flats) can help me with any thoughts on whether this seems like a good idea or not. More in-depth details follow...

In doing my research (e.g. Zoopla's sold prices list), the flat was initially sold for £200k in 2004. It's currently listed at £113k, having started at £120k at the end of November and dropping to £118k before Christmas (courtesy of the Property Bee Firefox addon).

The flat itself is a 2 bed 'penthouse', i.e. top floor with original iron and wood beams, has a huge mezzanine level (I had a pool table in one third of it) as well as a large living/dining room area, 2 bathrooms, ~90sq.m total floor area. It has no outside access (e.g. balcony) but has a secure underground car park space. Having been inside a number of the other flats in the building and seen many more listings on Zoopla (dating back to 2000), and tried to gauge sizes of many others from seeing the doors, windows and corridors, I think it's one of the 'best 3' flats in the building.

There are currently 2 other flats for sale in the building that are remotely comparable. One is at £135k with 2 beds and only one living space, 60sq.m. The other is £170k with 3 narrow beds and a smaller mezzanine, 90sq.m. Neither are top floor but both have secure parking. One other flat has very recently been sold at £200k with 2 beds, 100sq.m. It does have its own private balcony as well as secure parking, but only has one open plan living space which is smaller than all the living space in my old flat.

On the rental side, there's only one currently available at £1200pcm (seems a bit steep) which fairly comparable to the £170k one for sale. I was paying £650pcm but, looking at other flats near Manchester city centre, seemed more like I should have been paying £900pcm+. Again, it was only due to it being repossessed that the rental value was low.

Given the above, on paper I think my old flat ought to be worth somewhere between £150-180k, which would mean an easy £25k+ profit if bought at £110k (allowing for fees, improvements, etc.). I've been informed by the property management company (who I dealt with when I rented) that it was valued at £150k in 2011. The only reason I'm not jumping at the chance to buy right now is the slight concern that it simply might not sell that highly. However, even if I could only make £10k profit, it's still £10k. I find it very hard to believe that it is only truly worth £110-120k.

One more thing: the road it's on is in part of the Salford Central Regeneration scheme, which has already had the road itself and pavement updated and a couple of disused buildings knocked down, ready for a load of new shops, townhouses, entertainment areas, etc. to be built over the next 5-10 years. If all goes ahead as planned and doesn't run out of budget, the regeneration ought to make the flats even more desirable than they are now.

So, does anyone have any thoughts about whether this seems like a 'no-brainer'? Or whether I should consider other factors? Or forget about it altogether?

mrginge

If it is currently on at 25k under market value, why has nobody else bought it?

-Zigo

mrginge wrote: »

If it is currently on at 25k under market value, why has nobody else bought it?

That's what my girlfriend said.
I don't know. Perhaps:
- January is a quiet time of year
- people are put off by it being a repossession
- people are put off by it being vacant (and so doesn't look 'homely')
- it's not an area that many people are looking at right now (but may be in the future)

ACG

I know it well, the building from the outside looks nice. Ive not seen the insides though. But you have to wonder why it didnt sell at £120k - your answers may be correct, they may not be but if your prepared to take the risk then you could come out a winner by taking the risk that others wouldnt.

I'll be totally honest, i havnt read the whole post (im making my tea), but presuming your putting down a deposit (not relying on it being undervalued as your deposit) and your circumstances are ok, you shouldnt have too many problems getting the mortgage. The only other thing is that when you purchase a property you cant sell it for 6 months, lenders are reluctant to offer mortgages on properties that have been turned over so fast.

-Zigo

I have spoken to a mortgage adviser, I have no problem getting a mortgage and putting down a deposit.

ACG, I've sent you a PM about the inside

IveSeenTheLight

ACG wrote: »

The only other thing is that when you purchase a property you cant sell it for 6 months, lenders are reluctant to offer mortgages on properties that have been turned over so fast.

That's completely not true.
I've bought off plan, mortgaged when it completed and sold later within two months.

Many builders have bought properties, renovated and then sold.

This is done time and again.

there is no legislation that defines that the property must be held for 6 months before resale.

allybee101

The regeneration in the local area hasn't actually happened yet - that may be making people nervous about buying. I was in the process of buying a shared ownership in a 'regenerating' area. I didn't go ahead in the end for various reasons. I later found out that the shopping centre developer pulled out and the development itself isn't even finished!

Presume there are service charges and charge for parking? That may be discouraging buyers.

Finally surveys may reveal non standard build - could be tricky to get a mortage?