Do you reckon there’s cladding and other hidden trap in this property?

pantsu

Found a good newly furbished 1bed flat, prime location in a small northern city. Buy to let first time property investor.

There’s cladding work to be completed in spring 2022. Until then the flat has a fire watch team, causing a surge in service charge to £3.5k pa. Whether the service charge will decrease in spring 2022 is unknown. The service charge prior to the cladding surge is also unknown. No upcoming maintenance work in the near future.

Property therefore unmortgageable. Cash buy only ~ £50k (negotiable price). Tenant in situ paying 5.5k pa.

Red flags:

Flat on sale since mid 2020, property has been reduced by 40% since original price! yet still no buyers??

3 tenants moved in over the last 18 months, 2 of which did not renew tenancy beyond 6 month, the last one has not finished the 6 months yet.

Apartment block used be office block, refurbed in the late 2000. Since then there has been 48 sales made on the flats in this block (total number of flats been 45ish)

Budget for 2022 are as follows

2.5k legal cost + suveyor

3.5k service charge (n/a ground rent)

£900 voids + unforeseen circumstances 

£800 Lettings fee

1st year rent arrear £5.3k

Total profit for the first year  -£2.4k

I can ride out the loss for a year. But wishing it makes some profit in the feature and is 10% appreciation too much to ask for 5 years? 

Question:

I see potential value in this property given the cheap sale price and town centre location. I will be making a loss until May 2022 onwards, therefore I plan to hack off 2-3k from the sale price to compensate (£48k buy) -high chance seller may agree. 5 yr exit strategy, hopefully it sells for £55k by then? 

Just curious as to why this property hasn’t been sold given it’s dirt cheap. Are there hidden traps that I haven’t accounted for. I’m going for a viewing soon, any tips on what to look for? Areas of concern? 

diggingdude

Want to share a link? 

jimbog

.....or postcode and price if you aren't able to post links?

[Deleted User]

Talk to the freeholder and find out what they know and plan to do about the cladding etc.

GDB2222

You have given lots of detail about service charges, but not the key issue: What is the cladding going to cost to resolve? It might be £100k per flat, or £1k. I suspect that, once you have the answer to that, you'll know why it hasn't sold.

Leesabee1

The only way to get rid of the waking watch/fire watch is to install a fire alarm or remediate the cladding. A fire alarm is a temporary measure and must be followed by the cladding remediation. You haven’t mentioned how tall the building is so it’s unclear whether it qualifies for government funding. If you purchase you run the risk of service charges of an unknown quantity unless there is a clear plan in place to remediate the cladding. That could wipe out any chance of profit in the near future.