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Purchase price for fixer-upper on busy road & above commercial premises


jd123

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Hey everyone!

First post here, I’ve been listening to the pod for 2 years now and done some searching on here and other forums and and can’t quite find what I’m looking for so thought I’d give it a shot...

I am looking to buy a fixer-upper in south west London and need to determine what the maximum I am willing to offer. I wonder if any of you smart folk have any suggestions as to how I calculate this.
 

The property
This is a 3 bed, 1 bathroom flat with planning permission to become a 4 bed 4 bathroom with a roof terrace. It is in need of significant refurbishment to bring it into a liveable state. I would look to live here myself as well as rent out 2 of the rooms and use the smallest room as an office.
 

Above commercial (D2)
It is above a commercial premises (yoga studio) and from my research this typically equates to a 10-15% reduction in value. Is that fair?

I know it can also decrease my mortgage options (due to difficulty in selling at a later date) but my broker has suggested it should be fine in this instance. 
I have also included in my terms of negotiation that the commercial premises lease is amended in that it cannot be converted into an A3 to help protect future value. As the owner has the freehold to the commercial premises they have agreed to this amendment. This has been agreed.
 

Near a semi-busy road
It is also on a B road (Lower Richmond Road). I have heard this should also to a  5-10% reduction. Is that fair?

I recently recorded the sound in the flat at it was 30 decibels which is relatively quiet and that is with single glaze windows at present!

 

Planning permission in place
To factor this in I have multiplied the adjusted £psf by the potential additional sf, to calculate the potential value. I have then taken away the build cost to work out the difference and divided that by the current value.

This gives me 10%, so I have used that as the value increase of having the planning permission. Is that a good estimate? 

 

Estimated refurbishment cost
Next, I have deducted the estimated cost to bring it to a liveable condition (mainly cosmetic) to determine my maximum bid.
 

The calculation

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What do you think?

Naturally, I am also slightly cautious with many sources suggesting a significant dip in the market next year, is now really the time to be buying or would I be better holding out for a few weeks/months and get a better price? I would be holding this for 5-10 years so over the long run it would be fine I am sure but could I get a better deal next year?

Thanks,

James

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