Episode 38 Homes Under the Hammer

After years in the property business

Lucy and I realise that what goes up sometimes comes down.

Everyone knows the market's taken a tumble,

but it needn't always be bad news.

If you do your research and you buy at auction,

you can sometimes bag yourself a bargain.

Auctions aren't for everyone, but for some people, they are the only way to buy property.

But they can be nerve-racking.

At least when the hammer goes down, the property can be yours in weeks.

Yes. So, let's see what we've found

by trawling through the auction catalogues for you today.

'I peruse a plot in Cornwall that could leave someone sitting pretty.'

I reckon you could end up pretty much doubling your money.

'Looks can be deceptive at this London two-bed flat.'

-LAUGHS

-This new contemporary door doesn't match the interior of this property.

'And you'll be spoilt for choice with this mixed-use property in Nottinghamshire.'

All in all, this property is giving that sense of lots of options.

'These properties were sold at auction.

'We'll find out who bought them and what they paid when they went under the hammer.'

Today, I'm in Daphne Du Maurier country - quite literally.

This is the hilltop village of Tywardreath in Cornwall.

The world-famous novelist lived close to here for a while.

One of her novels was named after this village because, in Cornish,

Tywardreath means The House On The Strand.

It was a gripping tale of mediaeval time travel.

'If you were to travel back to Tywardreath in the days of yore,

'you'd have needed a boat because, until the end of the 18th century,

'much of this land would have been under the sea.

'This was a bustling natural harbour but over time

'the sea retreated leaving dry land.'

And that's what I'm here to see - a plot of land at a guide price of £70,000 to £100,000.

It's just through this gate.

We're on the outskirts of the village,

by the side of this fairly busy road, so good communications

and good location.

The plot itself, well, this is it. Lots of pampas grass and primroses.

When it comes to being a building plot, what am I looking for?

Something flat - it doesn't tick that box.

Somewhere which could have good connections to services like sewerage, electricity and gas.

Well, that needs to be investigated.

But in terms of location? Fantastic!

# Primrose Lane

# Life's a holiday on Primrose Lane

# Just a holiday on Primrose Lane

# With you... #

'It's nice to wander around a plot

'that's been untouched and dormant for a while.

'With its overgrown foliage and wild flowers

'it has become a haven for local wildlife.

'I think the rural setting and proximity to the Cornish coastline,

'as well as the amenities of St Austell, 15 minutes' drive away,

'make this a prime spot.'

Even in these tough economic times, especially in the building world,

good plots of land are still highly in demand.

This particular plot has another ace up its sleeve.

It's already got full planning permission for two houses.

Suddenly, that guide price is sounding very attractive, indeed.

'For the person who bought this plot

'for anything close to the guide price of 70,000 to 100,000

'and has the means and know-how, it could be a fantastic opportunity.

'The plans are for two semis with four bedrooms.

'They're pretty big houses.

'Is that right for the market here?

'We asked a local property expert for his opinion.'

The planning consent for two four-bedroom semi-detached houses,

is going to be the most profitable way

for a builder-developer to continue with that scheme.

However, if it is sold to the owner-occupier,

they may well envisage building their dream family home.

'So, the two semis have planning permission and could be profitable.

'What could possibly go wrong?'

# Here comes that sinking feeling #

There may be one issue with the land and that is, historically,

the sea used to come lapping up against the border of this property.

You may have to look at piling the foundations or raising it above the water table level

to make sure there's no subsidence or movement.

'Driving concrete or steel fabricated piles into the ground

'is one way of making the foundations more stable.

'There are other methods, but they all come at a cost.

'Suddenly, what looks like a doddle of a build

'might not be, after all.

'Some heavy duty homework's required.

'A good starting point

'is your Local Authority building control department.

'They can give you an idea of the typical soil type of the area

'and what kind of foundations you might need.

'You could get an engineer to survey the land,

'which would give you more information.

'Next, you'd need to get the figures for what building costs might be.

'Let's find out what returns are likely for the two semis, then we can do the maths.'

If the buyer continues with the current scheme,

each four-bedroom semi-detached house

could be worth in the region of £275,000.

'And if the houses were to be let?'

Each four-bedroom semi-detached house could fetch between £700 and £800 per calendar month.

# Life's a holiday on Primrose Lane... #

So, do the numbers stack up?

I think that, almost certainly, they do.

Buy this plot for around the guide price,

spend between £80,000 and £120,000 building each property,

and I reckon you could end up pretty much doubling your money.

The primroses are beautiful but I think the reality is...

they're going to go.

Let's find out who bought this place when it went under the hammer.

Lot 173.

It's a development site, planning potential

for two four-bed houses.

Lovely site, looking straight out over the little lane.

It ought to be 80,000, shouldn't it? 80?

I'm sorely tempted to not go less than 70. 70 somewhere?

70. Good man. 70 I've got. 70,000 I've got.

At 70. At 70. At 70.

At 70 once.

At 70... two. 72, 72.

74. At 74.

76, if you'd like it, sir. 74 on my right. Looking for six.

At 74 on my right.

At 74 once.

At 74 twice.

At 74,000. Bid's on my right. Sure and done? Here we go.

At 74 and out. Sir, yours.

'Although it was their solicitor who did the bidding

'and paid £74,000,

'the team who will get their hands dirty are project manager Roger,

'on the left, and his brother Graham, who's an electrician.'

# Two brothers, on their way

# One wore blue and one wore grey... #

'£74,000 was a great price

'but these days, finance is hard to find, particularly for plots.'

-Graham, Roger, good to meet you.

-BOTH: Hello.

Congratulations. Tell me why you wanted to buy this bit of land.

We've been watching it for a couple of years.

It was only recently we saw it was going to auction,

so we thought we'd go along and see what sort of price it'd go.

-What do you think about the price you paid?

-Excellent price.

-It was the lower end of the estimate.

-Yes, 74,000.

-What do you put that down to?

-Current economic climate.

With the auctions, you need the money when the gavel goes down.

-How much would you have paid?

-We went with a stop mark of 110.

-Wow!

-So, we're quite happy.

-I bet you had a few celebrations that night!

-Too true.

So that will all go into your profit margin, won't it?

Into the profit, or it gives us a big contingency fund.

-Comfort zone, cos you don't know what's in the ground.

-Tell me about you two.

We started up a firm last year, 50-50, building houses.

We built a couple locally and sold those.

-We've got four that we're building locally this year.

-Wow.

And this plot's come on the market as an extra, really, but the price attracted us.

-TRAFFIC PASSES

-Quite a busy road by the side.

It is, but it's got a nice aspect

and the village is a sought-after location.

The plot itself is great, isn't it? With a steep bank.

It doesn't make building easy, but the potential for views are great.

Yeah, but there is a retaining wall we've got to put in.

And because we're close to what used to be an inlet from the sea,

we're not sure what's under the ground.

As with all building, until you get in the ground, you don't know what you'll uncover.

-What would the worst-case scenario be?

-We would have to raft it.

But we're hopeful it'll be conventional strip foundations.

'Stand by - another lesson in foundations coming up.

'Rafting is used on soils like clay or peat.

'A reinforced concrete raft allows the building to float on the ground.

'Rafting is an alternative to piling and strip foundations.

'Pay attention!

'That's a strip of concrete supporting load-bearing walls.

'There will be questions later!'

Tell me the plans for the plot. What exactly are you going to do?

The existing planning is for two four-bedroom semi-detached houses.

We'll probably run with those plans.

I think it took quite a while in planning before

and I've had experience before with the planners.

You can waste two and a half years.

We want to turn this round in the next 12 months.

'Sticking with the current plans is smart.

'The plot has various planning requirements, like a retaining wall,

'terracing and flood prevention.'

The Environment Agency recently upgraded the flood protection.

So we've got to bring a finished floor level which is, I think,

1.1 metres above the pavement level.

-Right. That's the latest guidelines?

-Yeah.

For this to be flooded would be extraordinary!

It was a tidal inlet only a couple of hundred years ago.

-It was said you could see the sea standing at the church gate.

-Right!

So...it's not impossible, then, if there is the global warning that they talk about,

that it could flood again.

# You can almost

# See the sea... #

The feel of the property. Is it in-keeping with the village?

-Anything traditionally Cornish?

-It's going to be a slate roof and stone coins.

The planning authority wanted a cottagey feel to it.

So, we will go with their wishes.

-Who does the work? Who gets their hands dirty?

-We divide it.

Roger does all the project managing.

I'm an electrician, so I spend all my time on site with other trades.

The electrician side of things is a big cost and time side of everything.

The fact that you're doing that is fantastic.

What kind of figure are you thinking you might be able to sell them for?

I think we'd sell them for 250, top end.

We wouldn't get more, because of the Stamp Duty threshold.

-You're looking at, potentially, over 100,000 profit on each one?

-Yeah.

-Result!

-It is.

-Realistic timescale for the work?

With the other commitments we've already got on,

12 months is where we would see to have this finished and on the market.

Listen, congratulations.

Look forward to seeing what you do to this plot!

All right. Thanks very much.

Well, Graham and Roger are clearly absolutely delighted with their purchase.

To get it at that price with those potential profits, who wouldn't be?

Lots of work to be done. Lots of exciting things to see when we return later in the show.

'You can't get much more busy, bustling and urban than Battersea.

'Hugely popular with young professionals,

'it's full of fashionable shops, great transport links,

'many green spaces and attractive housing stock.'

The property I'm here to see is a bit of a puzzler.

It's a two-bedroom flat with a guide price of 250,000,

in need of modernisation.

So, years of experience tell me I'm expecting something dingy and dated.

Uh-uh! Look at the block. It looks brand spanking new.

In fact, under that cladding there's a 1950s ex Local Authority building

which recently received a facelift Hollywood would be proud of.

Amazing!

'If you look across the road, you can see what it looked like before.'

# Everybody comes to Hollywood

# They want to make it in the neighbourhood... #

'There's nothing wrong with honest but rugged red brick,

'but this new version has been honed and hammered

'into a star of the future.'

-LAUGHS

-This new shiny contemporary door doesn't match the interior!

Looks like it hasn't been painted in years!

But what an incredible space! I love this hallway.

You've got a generous kitchen - for London.

Once you've installed the new kitchen, that will look amazing.

And a really nice lounge area.

What would I do with these doors? I'm not sure.

Perhaps upgrade the glass, paint it some muted tones,

some nice ironmongery, big chunky silver door handles.

Could be quite a statement piece.

New windows overlooking a little garden.

I love this flat. It's got a fantastic feel to it.

For a central London location, it's a great space.

# This is the modern world... #

'I'm sure the look was once very contemporary and modern,

'but times change and so must this leasehold flat.

'Put down some wooden flooring, modernise that fireplace

'and make the most of the layout.

'That feeling of space continues in the bedroom at the front.

'It's a good-sized double.

'The second bedroom opposite the front door is no tiny single either.

'It all goes a bit pear-shaped when we get to the bathroom.

'This is one room that strikes me as small for modern living.

'Where the flat does win points for London is the outside space.'

Yes, it's overlooked. Yes, it's not very big.

But this little patch of grass adds 50 grand to the value of this place.

That is some expensive lawn!

'Yup, that's it - all of it.

'And, no, the grass isn't made of gold.

'For London buyers, this private outside space is worth its weight in the stuff.

'Around the back is the communal area, which is well presented and maintained.

'This really is a bit of a star, but is it one I'd want to sign up?

'Unfortunately, that's not as straightforward as it may seem.'

Why unfortunately?

Well, as an investor, I'd have wanted to have bought before the work was carried out.

Snapped up a bargain and then, bingo!

Suddenly, you're sitting pretty with a property people are queuing around the block for.

And the value?

On the open market, this facade would add 40 grand to the price of the flat just like that,

without you having to lift a finger.

Ooh! I hate feeling like I've missed out.

# Oh, did I miss again?

# I bet I missed again, o-oh... #

'This facelift's no freebie. It states clearly in the legal pack

'that the new owner is liable for a percentage of the cost of that work.

'It may pale into insignificance against the amount of value added,

'but it does need to be factored into the equation.

'What does a local property expert make of this flat that was guided

'at 250,000?'

From the outside, very smart, very presentable, very modern and incredibly desirable.

Inside, as it stands, the property does need modernising throughout.

It's very spacious, good-sized double bedrooms

and a decent garden as well, so fantastic potential.

'If the inside of the flat was renovated to a Hollywood A-lister standard like the outside,

'what effect could that have on its resale value?'

Once renovated, I would suggest £475,000 to £500,000.

'And if rented out?'

For rental, once renovated, it would achieve between £1,800 and £2,000 per calendar month.'

You can't judge a book by its cover.

I think this flat has huge potential

in an area that's always extremely popular, with prices to match.

Let's find out who went for it at the auction.

Lot one, a purpose-built two-bed flat, sought-after location,

just round the corner from Clapham Junction shops and so on.

Anyone kick off 250?

She just beat you. 250. 255? 260?

265? 270? 275?

280? 285? 290? 295? 300?

305? 310? 315?

320? Coming to you. You're 320. 325?

325? Madam, with you. 325.

330? 335?

335. 340? 345?

350? 355?

355, new spot. 360...?

'It was a popular lot on auction day.

'We rejoin the bidding at 400,000.'

400? 400, back in.

401? 401. 402?

403?

404?

405? 406?

If not, 405. Anyone else?

It's with you. 405. First time.

Second time. Third and last time...

Sold, 405. Well done, madam.

'The successful bidder in blue, partly hidden from view, was Stephanie.

'She's retired, but does have a part-time job teaching English as a foreign language

'and sometimes resides in France.

'She clearly felt this place spoke to her, paying 155,000 over the guide price to bag it.'

-Stephanie, congratulations.

-Thank you.

-I really like this flat.

It's got an amazing spacious feel to it in such a central location.

-Glad you think so.

-Tell me what led you to this property.

Well, I have been looking for at least six months,

through the traditional way, through the letting agents, estate agents.

I wanted a ground floor flat with a little garden

and decent sized rooms.

It's really been difficult, in my price range, to find it.

So I thought I'd look in the auctions. It's the first time and a bit scary.

Do you feel you've got the flat that's right for you?

I'll only know that for sure when it's been refurbed, but I think so.

Fingers crossed.

-Your ultimate plan is to let this out or to sell it on?

-To let it.

Because I want to improve my semi-retired income.

Possibly, after a year or six months, I might consider selling it.

Stephanie, tell me a little about yourself.

-Well, I live on a houseboat in Chelsea.

-Wow!

-That was built ages ago.

What is it like living on a houseboat?

The nice thing is that it's a bit more like being in the country.

You're on the river and you've got wildlife around you.

It's quite quiet and it's rather special. You've got a lot of sky as well.

'How lovely. What a way to live, especially in London.'

# Took a trip on a houseboat

# It's fun, you and me... #

'Less lovely was the 7,000 Stephanie had to pay to the freeholder

'towards the exterior refurbishment of this property.

'Ouch!

'Added to her £405,000 purchase price, Stephanie's total investment so far is 412 grand.

'That's before she's done any work to it.'

I've got to rewire.

I'm moving a badly placed gas combi boiler into a cupboard.

I'm going to completely redo the kitchen and make it nice,

including a dishwasher and everything like that.

I might put a breakfast bar in. I was going to ask you whether that might be attractive or not bother.

You always lose a bit of storage.

But it's just so worthwhile to be able to sit down, have a sandwich in your kitchen.

-That's what I thought. Do you think so?

-Definitely.

It isn't an elderly thing, then? It's a convenience thing.

-It's not an elderly thing! I'm quite keen on little tables.

-Exactly.

The biggest table you can get in there without it looking too big will be the thing to do.

'Stephanie has a budget of around 16,000 - that's not a great deal,

'considering she'll need to change both the kitchen and bathroom

'and fit all the appliances.

'She's currently getting quotes from two contracting companies

'and hopes to have it all done in a month.'

-Are you going to enjoy this?

-I think I shall, when I've got over the, "Ugh! What can we do with this?"

And I can see it beginning to take shape the way I want it.

Stephanie, I can't wait to see what you do here.

-Congratulations and good luck with the project.

-Thank you very much, Lucy.

Stephanie has a fabulous flat and a marvellous opportunity to add value and transform this place.

I can't wait to see how she gets on.

Join me later in the programme to find out.

'Coming up, I'll view this mixed-use property in Nottinghamshire,

'once I've decided how to make my entrance.'

House way? Shop way?

'In London, we find out if Stephanie's big spend left her smiling.'

It's been worth the extra expense, the careful planning and rejigging. I'm delighted with it.

'First, did the earth move for Roger and Graham on this Cornish plot?'

We moved out about 2,000 tonnes of soil.

'We return to Cornwall now, the hilltop village of Tywardreath.

'In Cornish, that translates to House On The Strand.

'Developer brothers Roger and Graham paid £74,000 for this land,

'which came with planning permission for two four-bedroom semis.

'They knew the area pretty well, but they also knew the problems

'that might lurk under the ground of this primrose-covered plot.'

We're close to what used to be an inlet from the sea.

As with all building, until you get in the ground, you don't know what you're going to uncover.

'Electrician Graham lives 25 miles away.

'Last year, the brothers went 50-50 on a joint building company.

'They've built and sold two houses and have four more they're building,

'plus the two they're going to build here.'

-Who actually gets their hands dirty?

-Roger does all the project managing.

I'm an electrician so I spend all my time on site with the other trades.

What's the projected build costs?

-We're looking at about 200,000.

-For the both?

-For the both.

'The brothers had a timescale of 12 months for the project.

'We're back just two weeks shy of that, so not bad going at all.

'This pair of semis is now built!

'There's a nod to the Cornish cottage feel with slate roofing

'and stone details.

'The house on the right is finished and already on the market.

'Inside, this is very much a contemporary home.

'Take it away, Roger.'

We put in a reasonably modern kitchen with a gloss finish

and the soft closes,

even though the property is a cottagey sort of style.

We've left it without the appliances.

In a sale negotiation, we could add the American freezer, washing machine and dishwasher.

This is one area where we changed the plan slightly.

We brought the downstairs cloakroom underneath the stairs

rather than leaving it across the front aspect window,

which we thought was a big improvement to the original plan.

'Upstairs, there are three bedrooms.

'The master one has an en suite.

'Plus this family bathroom.

'What roles did the brothers take on the project?'

I'm an electrician by trade, so I did all the first and second fix.

Roger project managed it, so he's there every day.

'The first job Roger had to undertake before building could start

'was checking out the condition of the ground.'

Because of the slope of the site

and also planning obligations to stay above the flood plain,

we moved out about 2,000 tonnes of soil

just to get down to the level for the foundation.

'The brothers knew they had to satisfy planning obligations.

'The other big question was what kind of foundations would they need?

'Would it be piling, rafting

'or the more straightforward strip foundation work?'

Fortunately, conventional foundations were OK.

Till you get to that point where you've got your slab, anything could happen.

'And it has.

'The steep slope needed some brains to make it work,

'so the garden is terraced and a huge retaining wall built.

'At what cost?'

It cost us about 20,000 to do the dig

and put the retaining walls around the site.

'So far, Roger and Graham have spent 12 months on the build,

'as they've also been building two other properties at the same time.

'How much more work is still required here?'

This house is finished. It's on the market.

The other house exterior's all finished.

The interior needs to be first and second fixed.

Six weeks, two months, that'll be on the market as well.

'They had set a build cost for both houses of £200,000.

'How's that fared?'

It's looking like we're going to be pretty much on budget.

We're at 174,000 at the moment.

We've got a shell to finish on the house next door.

That will bring us in to pretty much spot on the 200,000.

'With the £74,000 they paid for the plot at auction,

'that will bring their total investment to £274,000.

'That was a tricky site.

'The terracing feels a bit of a compromise.

'What do two experts make of it?'

They're very attractive houses, got great kerb appeal

and sit nicely amongst the neighbouring homes.

I was wondering how they were going

to make it look not too steep at the back.

They've done well. They've stepped it nicely.

It'll be lawn and there'll be a shed in due course. That's a clever bit.

It's not steep. It's really done well.

Terracing it does make some useful areas,

although I'm not entirely convinced it's best for very small children,

unless there's a bit more landscaping.

'Graham and Roger want to sell and move on to another development.

'How much rental income could the properties generate?'

I'd expect to be renting the properties out around £700, £750 per calendar month.

Rental per calendar month, you're looking around £775.

'If both houses were let, they could produce a yield of over 6%.'

Yeah, yeah. That's...very good.

That'd be a good return on the investment we made but that's not what we're going to do.

'No, selling is the plan.

'So, how much could each house be worth?'

I would value these houses somewhere between £230,000 and £235,000.

I'd expect the properties to sell for between £225,000 and £235,000.

'If both houses sold for 235,000,

'that would make a total of £470,000.

'For Roger and Graham, that would mean a profit of 196,000

'minus the usual tax and expenses.

'Are they happy with that?'

Yeah. Initially, we had a slightly higher valuation,

but that was a little optimistic and that's a realistic price.

'The brothers look like they'll be rewarded for spotting the potential of this plot

'and not being deterred by the history of high tides.'

It's been fantastic. Not all of them are like this.

None of them are like it, normally,

but I think that's a reflection of the state of the market.

It's very difficult to get the finance and complete a build.

That's why the site went for the price it went for.

# I'm a su-undial... #

'This is the Nottinghamshire market town of Sutton-in-Ashfield,

'home to this, the largest sundial in Europe.

'Could it be a sign that today's lot is a sunny proposition?'

So, what am I here to see? Bit of an interesting one, this one.

Here I am in this largely residential area.

The property was, originally, just a house

but at some stage in the past, it's been converted into a house

with a shop on the front of it.

So, one of those mixed-use opportunities.

The guide price was 74,000 quid.

Which way do I go in? House way? Shop way?

House way? Shop way?

Let's go for the shop.

Huh, it's in a bit of a state.

With commercial units, what we're interested in is the square footage.

In the past, it's been a neighbourhood shop.

You've got all these refrigeration units selling soft drinks.

Lots of shelving!

If you buy this place, you obviously get all the internals,

and somebody on one of those auction websites would probably be quite interested in buying this.

What you might do with it?

It's got a lot of frontage and parking out the front.

Is it viable? I don't know. Around here? Maybe.

Worth doing some research, but a good starting point

and it looks, I think, worse than it actually is.

'This part of the property might have been used as a living room once

'but I understand it's been a shop with the owner living next door

'since some time in the 1930s.

'Will it remain on the shelf?'

For somebody looking to run the shop

and live in the property at the same time, this place really is ideal.

It couldn't be much closer linked.

That's the shop. Small doorway then you're into the house.

Kitchen clearly in need of some major reworks.

The floor all over the place.

But it's not a bad size and that's what you're looking at.

You're committed to spending a bit of money sorting it out,

but I think you've got a very good basic property to work with.

Kitchen there, rear sitting room area, then up to the bedrooms.

Up here, I like this nice-size landing area.

Pretty traditional layout. Good sized bathroom.

It needs sorting out, of course, but at least it's upstairs.

Good-sized bedroom at the back, box room there,

then to a reasonable sized double bedroom on the front.

Another option for this place could be to rent out that shop unit as it is,

close off the entrance between the shop and kitchen,

then rent this out as a separate flat - it's a maisonette, really.

That's another option.

All in all, this property is giving that sense of lots of options.

There's plenty of flexibility with the layout.

It could be turned into two flats, one house

or stay in its current configuration as a maisonette and shop.

That would need its own loo facilities at the very least.

You could run the shop and rent out the flat

or rent out the shop and live in the flat.

Options, options everywhere and if you were to keep the business going,

you could utilise what's on offer outside.

At the rear of the property, a big pile of rubbish!

Lots of space, although most of it is concrete.

You can see that it needs a bit of tender loving care

to the things like windows and pointing.

Quite a lot of space. This concrete area. Couple of double garages.

Lots of little outbuildings and this little area of sort of garden.

In terms of space, a big tick.

In terms of the condition it's in, bit of an "uh-uh"!

'Before you cross this property off your list

'or give it a big tick, you need to weigh it up.

'I'm seeing more commercial possibilities.

'Perhaps a workshop or a builder's yard. There's certainly room.

'All subject to getting change of use, of course.

'What does the auctioneer who sold it reckon

'is the best way forward for this property,

'guided at £74,000?'

The property's definitely got potential, in terms of segregating the upper floor accommodation.

It could easily become a self-contained flat,

depending on what you wanted to do downstairs.

If it was made into two flats, that would increase its prospects

quite significantly.

They're easier to rent out and you'd derive a better income from them.

I think it depends what you want to do with it, really.

If you have a use for the shop and you were an owner-occupier, then you would add value.

'Could this be a good investment?'

If you were renting the property as a single unit, as it is now,

but clearly with some money spent to upgrade it,

you'd probably achieve a rental of about £8,000 a year.

If you were to separate the upper floor accommodation and make a flat out of that,

so that you rented a lock-up shop at ground floor level,

you would probably have an aggregate income of nearer £10,000 a year,

but you would have to spend a lot more money in order to achieve that.

'Of course, much of the shop's value would lie in it being a going concern with an income.

'What if the whole thing was sold in its current configuration?'

If it was rented out as a single unit, as it has been,

then as long as there is an active lease on the place,

which would give greater appeal than an empty shop,

it would probably achieve about £100,000.

If you made a flat upstairs and were able to rent out the shop,

you might even get up to £120,000.

I'm a big fan of mixed-use developments.

It's great to have commercial and residential and not have all your eggs in one basket.

What plan did whoever bought this place hatch for its future use?

Let's find out who that was when it went under the hammer.

Lot 29 is a vacant retail sales unit

with three-bedroomed living accommodation.

75,000 for it? Bid me where you will. 68 for it?

68? 65? Thank you. I'll take 65 as a starter.

At £65,000.

66 I've got. At 66. 67?

67,000. 68?

69,000. 70,000 I've got.

At 70. 71?

71? 71. At 72.

73. 74? 73 and a half.

74? 74 and a half?

74,000. The bid's against you at 74,000.

Going once. Going twice.

Third and last chance. All done? £74,000?

Sold at 74,000. Thank you.

'Looking pleased with his successful bang-on-the-guide-price bid of 74,000

'was Phil on the left here.

'Next to him is his friend, John.

'I met them at the property to hear their story.'

-Phil, John, great to meet you both.

-And you.

Congratulations. Tell me why you wanted to buy this house.

-I want to start my own letting agent's.

-Right.

I've been a landlord for ten years and decided the natural step was to start my own letting agent's.

So you're going to utilise the shop bit or the whole thing?

The shop, and then the house will be rented out.

Wow! What's the relationship between you guys?

We're friends, basically.

I've worked with Phil for a number of years now, off and on.

-I like to think I'm his right-hand man!

-MARTIN LAUGHS

-You're supposed to say "yes".

-Oh, right. Yes.

LAUGHTER

-What's your involvement going to be?

-I'm going to help Phil do lots of work on the property.

-And I hope to be running the letting agency for him.

-Fantastic.

-You're going to do a bit of the work beforehand then build the place you're going to work in?

-Basically.

-Yeah. Very hands-on.

-So what's the process now?

-What's the steps to getting it sorted out?

-Clear the rubbish out.

All the equipment out of the shop and get it back to a bare canvas.

-I've got to get planning permission to change the use from...

-A1.

..a newsagent's, A1. It's got to be A2 for a letting agent.

I've had a surveyor look at it.

We're going to do some alterations, make a toilet and kitchen for the shop.

-Wow!

-We're going to knock through into the outbuildings.

-Ah!

-Hopefully. And put a toilet and kitchen in there for the shop.

The idea is what, to literally renovate this part, the house bit, and rent that out?

Yes.

'So, this shop is staying in business.

'Phil already has a portfolio of 26 properties he lets out,

'so that's something he knows about.

'A letting business seems like an obvious area to utilise his expertise.

'There's a lot of work to turn this into the letting agency downstairs,

'never mind refurbishing the maisonette.'

What's the budget for the work?

Not a lot. Probably...3,000?

Three? What? Including sorting this out?

Well, a new kitchen, if the two of us do it, maybe 1,000,

-1,500 for a kitchen.

-Right.

And all the labour is the two of us.

-Have you worked together before in this kind of thing?

-Yes, yes.

-John helped me on a couple of my other houses.

-Right.

-We put a new kitchen in one, didn't we?

-We did, indeed.

-And we get on well together, don't we?

-Yeah, we have a laugh.

# Come on, people Got to work together... #

'Having enjoyed working together before

'and with a rental portfolio already built up for the letting agency,

'they could be laughing even more.'

-How many staff are you going to have? Just John?

-Just me!

-Just the two of us, really.

-But I'll be predominantly in the shop.

-The front man!

-The front man, indeed.

Timescale for getting the shop opened?

About three months for the shop.

-Maybe six months for the shop and house.

-Right.

May possibly run to nine months, I don't know.

-The key thing for you is to get the shop opened?

-Yeah. That's the priority.

Well, congratulations. Good luck with it.

-Thank you.

-Looking forward to seeing how you get on.

-Thank you.

This really is an ideal property for Phil and his new venture with his lettings company.

With John's help, it should go to plan - but really?

That budget? 3,000 quid to sort it out?

You have got to be kidding.

Find out how they get on... Hahaha! ..later in the show.

Time and tide wait for no man, but we can't possibly wait any longer.

We've given our developers plenty of time. Have they achieved what they wanted?

There is only one way to find out.

'Earlier, I visited the popular south-west London area of Battersea.

'This block of flats had certainly been refurbished on the outside,

'but I was concerned that this meant less scope for a healthy profit.

'However, 76-year-old Stephanie was undaunted,

'even after paying a whopping 405 grand for this two-bed flat.

'As it was her first investment property, she was wisely open to advice.'

I might put a breakfast bar in. I was going to ask you whether that might be attractive or not bother.

It's so worthwhile to be able to sit down, have a sandwich in your kitchen.

-Do you think so?

-Definitely.

-It isn't an elderly thing?

-It's a convenience thing.

-It's not an elderly thing!

'Stephanie was going to employ a builder to refurbish the flat.

'She had set a budget of 16,000 and hoped to have it ready to let in about a month.

'It's now almost two months later

'and the place is just about finished.

'Look what a lovely flat Stephanie's created!

'In the living room, Stephanie has followed my suggestion

'and retained the dividing doors.

'But did she take my advice about the breakfast bar?

'She most certainly did.'

The kitchen, that was really important. It was in an awful state.

We had a sink here. That's had to be moved to, as you can see, here.

And, um...I wanted a breakfast bar and I wasn't sure where to put it.

That's why we had to move the sink.

I'm really pleased we moved this and hid that.

That's very discreet. I'm delighted with that.

All the other appliances are integrated so you can't see them.

Because I live on a boat and I'm used to small galleys,

I like things hanging on hooks.

It's been worth the extra expense, the careful planning and rejigging.

I'm delighted with it.

'The layout in the bathroom has remained pretty much the same,

'but with a new suite and hidden cistern,

'it looks far less cluttered.

'And I love the tiles!

'First job for Stephanie was to find a qualified builder

'to do the refurbishment.'

I chose a contractor builder out of two.

Before he took decisions about positions and styles,

I wanted to be consulted on all that.

He's been very good on that.

'The flat's been rewired and new radiators installed.

'I think Stephanie made the right choice of engineered wood flooring.

'That's a veneer of solid wood on a base.

'It's pricier than laminate but looks so much better.

'Apart from the high-quality finish on the fittings,

'she spent about £3,000 furnishing the flat.'

I've got two double beds, new, obviously,

a new leather sofa, an oak table and four matching chairs

and an extra easy chair.

'Outside, the garden is a real plus.

'Stephanie's added some furniture, had the wall painted

'and disguised those manhole covers a bit.

'Overall, this first investment property for Stephanie

'has been a real success.

'It's taken a little longer than the month she'd hoped for.

'It's going to be nearer to seven weeks.

'I wonder how her £16,000 budget fared.

'I don't think it had taken the furniture into account.'

16,000 did not include the furnishings.

And, of course, the breakfast bar, the pipes, you know, the drainage,

the boiler, that all cost more.

Probably closer to 18 or 19.

Then my furnishing, that's a bit difficult.

Each room probably is going to be up to 1,000 a room.

Not the kitchen, though.

'So, taking furnishings out of the equation

'but adding 19,000 renovation costs to the 412,000 purchase price,

'which includes her share towards external works,

'her total outlay is 431,000.

'That does not include legal fees, Stamp Duty or that furniture.

'Time to hear if it's all been worthwhile.'

The flat's great. It's lovely to have two double bedrooms.

The finish is good and the location's even better.

It's a beautifully refurbished property, very modern,

clean lines, very light, very nice.

A garden's normally just seen in a Victorian terrace,

so having some outside space with a modern apartment is really useful.

It's great that it's furnished.

If anyone wants to move in, they can without any worry.

It wouldn't necessarily add any more value to the property.

'How much rental income could it generate?'

I think this flat could rent for £1,600 per calendar month.

I believe the flat would rent for £2,160 per calendar month.

'With that range of rental valuations, there could be a yield of between 4% and 6%.'

This being a garden flat, I was hoping for something in the region of about 2,000 a month.

So those figures are interesting, really. Hm.

'What about the resale value?

'Is the flat now worth more than the 431,000 Stephanie's invested?'

I think this property could resell for between 490,000 and 500,000.

I believe this flat would resell for £575,000.

There was one upstairs on the market for 550, without the garden.

'What a difference, indicating the margins involved

'in estimating London prices.

'However, they suggest a profit of between 59,000 and up to 144,000.'

The first one was around what I hoped for. The second one was more.

Really delighted. I have spent more than I had estimated.

It makes me feel a lot happier that the extra investment

is not going to be lost, if I do decide to sell.

'Stephanie's made a great job of her first foray into property developing

'and the figures reflect that.

'How did she find her new venture?'

It has been a bit nerve-racking cos you never quite know until the end

whether it's going to be worth it.

'Might she take on another one?'

Not immediately, no!

But I might in the future, now I'm a bit wiser about it all.

I would know a bit more.

I would do it, so long as I didn't have other big things happening at the same time.

'We're back in the Nottinghamshire town of Sutton-in-Ashfield.

'It was here I met pals Phil and John.

'Phil had purchased this mixed-use property at an auction

'for its guide price of £74,000.

'It was a shop at the front on the ground floor and a maisonette at the back and on the first floor.

'Phil's been a landlord for ten years and has accrued 26 properties.

'His plan was to set up a letting agency with the help of friend and colleague John,

'but it appeared not much else.'

What's the budget for the work?

Not a lot. Probably...3,000.

Three? What? Including sorting this part out?

Well, a new kitchen, if the two of us do it,

maybe 1,000, 1,500 for a kitchen.

-Right.

-And all the labour is the two of us.

-Have you worked together before in this kind of thing?

-Yes, yes.

-John helped me on a couple of my other houses.

-Right.

-We put a new kitchen in one, didn't we?

-We did, indeed.

-We get on very well together.

-Yeah, we have a laugh.

-Yeah.

'That £3,000 budget to refurbish a three-bedroom maisonette

'and create an office with a loo in the shop area didn't sound like nearly enough to me.

'Phil had a maximum nine-month timescale.

'One year later, we're back.

'The shop is now a bright and welcoming office space,

'ideal for Phil's letting agency.

'The maisonette has a slightly different story to tell.

'It's pretty much as it was. That's because Phil's plans have changed.'

Originally, I was going to have a two-bedroom flat above the property.

The logistics of doing that and the costs were prohibitive, really,

especially in the current climate in the UK with finances and everything.

I thought, hopefully, when the business takes off,

I could expand upstairs myself and use offices upstairs.

I want to be an estate agent as well as a letting agent in the future.

'So, plans to expand already, but Phil did find

'there were unexpected costs in getting it to this stage.

'He had to replace joists, rewire, replumb - including new radiators -

'replaster and repaint.

'He still has the flooring to do.

'Given the change of plan, has that altered the tiny £3,000 budget?'

If you don't take into account the furnishings and the IT equipment I've had to buy for the shop,

which isn't really anything to do with the fabric of the building,

I've probably only spent around £2,000 in planning consent,

surveyors and materials to do the shop up.

Before I went any further with costs, I wanted to make sure that the letting agency was a success.

# That was his first step to success

# Lord, it was found out that very way... #

'And here's hoping it will be.

'Phil's also kept costs down by doing some of the work himself,

'but he did get experts in for things like electrics.

'Since his former colleague John has moved on to pastures new,

'Phil has really had his hands full, in more ways than one.'

Since I saw you last, I've had a lovely baby daughter last year.

She's absolutely adorable. CHUCKLES

So I'm very happy.

'Aw, delighted to hear it.

'Now that the work here is complete, so far,

'he and his family can look forward to more time together.

'But not quite yet.

'We invited a commercial property agent and the auctioneer who sold it

'and saw the property last time we were here to take a look around.'

It was about 12 months ago that I was last here

and apart from the room we're in,

I don't think a great deal has changed.

Maybe a bit of paint here and there, but that's about it.

I think they were concentrating on the shop and, essentially, that's done.

The shop's good. It's nice and light and bright.

And will attract prospective tenants.

With regard to the accommodation, particularly the kitchen and bathroom, they need refitting.

They're dated and anybody else coming into this property

would need it to be modernised.

'Phil purchased this property for £74,000.

'With his £2,000 spend on the work, his total outlay is 76,000.

'If he decided to sell it on as it is, what could that raise?'

It's probably got an open-market vacant possession value

of something between £85,000 and £90,000.

I think you could only sell the property as a whole.

There is no chance of selling it in two separate lots, i.e. the first floor and the ground floor.

With regard to the value, I'd have thought you'd be talking

somewhere in the region of £90,000, at the present time.

Not as much as I hoped.

'Having a sitting tenant running a business upstairs

'might help increase the value, as would further renovation work.

'But based on these values, Phil could, at this stage,

'still be looking at a profit of between £9,000 and £14,000,

'minus tax and expenses.

'And if he changes his mind about the business, as I said before,

'this is a property that offers plenty of options.'

If it had been me, I'd have converted the ground floor shop into a lounge

and the whole property into a detached house.

I think the value would have increased to somewhere in the region of about 120,000.

If you convert it into a single residence,

and obviously you've got to inject quite a lot money to do that,

you've got a significantly higher margin.

I think ultimately it would have a value of £115,000, £120,000.

That's what I thought. That's more as a house.

I know the houses in the street sell for...

Smaller houses sell for around 110,000, semi-detached.

'That would raise Phil's potential profit

'to between £29,000 and £34,000, minus the cost of the work and tax.

'If Phil were to upgrade the flat and let it and the office separately,

'he could see an impressive yield of between 9% and 11%.

'But he's more than happy with the office for his business and the additional space upstairs.

'First things first - a well-earned break.'

Next on the cards for me, I've not had a break in a year and a half.

My wife hasn't seen her family in Thailand for a year and a half.

Having had the new baby last year,

we intend to go away for a nice long holiday and relax.

Forget about everything for a good few weeks.

I don't know about you, but I never know what to expect from the properties we feature on the show.

They're so full of surprises, we never know what we're going to find.

-Join us next time for more Homes Under The Hammer.

-Goodbye.

-Goodbye.

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