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How to maximise your luxury property investments

by John Saunders
31st Jan 22 1:05 pm

 Toby Johncox, head of mortgage sales at Enness Global, the world’s leading brokerage of high net worth and ultra-high net worth mortgages, in conversation with Nicolas Roux, Founder of Rive Gauche London, the full-service luxury interior design company. They discuss how to maximise your luxury property investments by looking at the design of the property, and also the development of that design.

Toby JohncoxThe first thing we want to touch on is what we’re seeing in the marketplace and giving a quick update in terms of prime central London property, and what is happening in the market. I’m based in our Dubai office and I can’t remember a time during COVID, after COVID, pre-COVID, when we were this busy, and there’s been that much interest and excitement in investing in London real estate. Now, if you’re in London, you’re feeling the heartbeat of London real estate. What is your sense of the market at the moment?”

Nicolas Roux Most of our international clients at the moment are still very much focusing on prime central London. Still very much looking at an investment, looking for the kids to go to school or looking at selling a slightly longer term investment in Central London. We have a bit more demand at the moment outside of London. People want big estates, outdoor space, obviously due to COVID. I think it’s also a natural trend.”

COVID-19 has had numerous impacts on various industries in the country, and the real estate market is no exception. During the early months of the pandemic, property prices climbed despite the noticeable decrease in the country’s gross domestic product (GDP). However, a lot of people still purchase their first home virtually.

Since a majority of the population was forced to stay at home, many homeowners have focused on home improvements to sustain their lifestyles and cope with stress. Spending on home projects meant the increase in their property’s value. So their homes are more expensive in the event of a home sale.

Toby JohncoxWe see a lot of Middle Eastern clients, Russian, African and Asian clients, and the UK is still this nice place to put your money to keep it safe, but also to invest in a tangible asset. And I think the more people I speak to there is this trend in, and excitement for, more outside space – maybe some more light, bigger windows, high ceilings. But equally there are all the amazing things about living in prime central London and everything that comes along with big city living.

“So let’s get onto the core topic, which is the luxury development process and key challenges. What mistakes people are making and some top tips. So what are the key challenges people face when approaching a massive renovation and design project on a luxury property.”

Nicolas Roux The first thing is trying to understand how much it will cost. People will buy a property, they want to renovate it, they want to develop it, they want to extend it, so trying to understand what money they should invest, and making sure they recoup that money at the back end of their project. That’s key. So there is always a bit of a bigger debate at the beginning to try to understand and put a figure to the development budget of the project. The other challenge will be the timing because, obviously, especially on investments, if you want to buy a property, and then sell it on afterwards, timing is essential. And it’s always very important to plan it properly because often people will try to be a little bit optimistic about what it will cost. And then that will create a problem on the cost elements. But adding value, it’s always about what you’re trying to chase, how you add value to your properties. Sometimes it can be adding space, sometimes it’s going to be improving your space, or sometimes it’s going to be creating that emotional value, so we can touch upon that as well. And then where do you start? Because in the construction and design industry, especially in London, there are a lot of different people offering different solutions. So it’s quite fragmented for clients. It’s quite difficult to understand where to go on a big project, or even a smaller project can be quite difficult.”

Toby Johncox On a personal level, these projects are, by a long way, the biggest financial investments people will make in their lifetime. And it’s really critical to build a core team at the start of the process. On the standard purchase side of things that would be accountants, lawyers, mortgage brokers and a good real estate agent to find you that perfect property. When you’re then looking at a big renovation and design project on that property where does someone start?”

Nicolas Roux The approach is a little bit like starting a business. So when you start a business, you will want to make a plan. You want to understand your objective, the vision you’ve got, and then you’re going to start putting your business in place and employing people in order to deliver to the plan. And property is very much in the same remit. You will approach the project and structure your project differently if you were going to buy a property, renovate it and sell it, than if you bought your family house that you’re going to keep for maybe 5 years, 10 years, or you’re going to use as a pied-a-terre. For example, in London, if it’s an investment and you want to flip the property quickly, time and budget is going to be essential. So you’ll probably structure your project in a way where you want to fix your time and your budget as quickly as possible. And obviously understand your market because you’re designing and developing a project for someone else. So you also need to be very close to real estate specialists to really understand who you are developing for.”

Toby JohncoxIf you’re building for yourself, and you’re making a finished article, or you’re building a property in order to sell on, is there a significant difference in the quality that people are producing? Or is it more just in the type of taste that you apply to those products?”

Nicolas Roux No, I think there is a bit of a difference in the quality. If you’re investing in your own property that you want to pass on to your kids, you’re going to really think about the design, the aesthetic, the function, the durability of your property, because you’re going to have to maintain that property for 5 to 10 years.  On an investment, the quality is also important, but I would say you probably focus more on the aesthetic first, because you want to appeal to a certain market. So maybe you’re not going to strip everything completely out if you don’t have to, or start improving the thermal efficiency of your property, or energy efficiency of your property, because that’s something you’re going to sell on and maybe that’s not required. So there are definitely things that you’re going to balance, depending on how long you are going to keep a property.”

Toby Johncox In terms of the potential to add value to property, that’s really what everyone’s doing this for. If in an ideal world you can buy the perfect product off the shelf, you always would. But it’s like a suit, getting a tailor-made suit just fits better. And buying a property is the same. Maybe you can give us some insight on some projects you’ve done in the past? How do people go about adding real value to their properties when they’re developing them? For their own use or even for investment?”

Nicolas RouxThere are three key elements to add value to your property. The first, obvious one is to create space. So if you can extend your property, if you can dig a basement or add a floor, it’s clear and simple, you’re going to have more internal space, therefore you’re going to create value. A good tip that maybe people don’t know about is in the UK, you can go to the online planning portal, and have access to all the planning history in your street and in your area. So if you are thinking about doing an extension to the back of your house, or adding a floor, you can see whether that’s been approved by someone else before. So that’s a way, if you’re thinking about extending your property, to have a quick look before you go too far into the process. So that’s the first thing – creating space. The other part is improving the space and the function.

“An example is a property over four floors that we worked on. There was an upper ground floor, a lower ground floor, and the property hadn’t been touched for 20 years when we looked at it. All the living areas of the property were on the raised ground floor: the living room, the dining room and the kitchen. And that was the only public space in the property where people entertain and the family gather together. On the lower ground floor, it was very much back of house, a bedroom and technical space. So what we did, was basically create a formal and informal space. It is always very important to be able to have areas where you can entertain and have slightly more formal functions and still have a family space. So on the raised ground floor, we created a formal space where you have a connected dining and living area and also a study at the front, which is nice if you’re working from home as well. If you have business colleagues coming in you can just take them straight to your office, you don’t have to take them through the house. And on the lower ground floor there’s an open dining and kitchen area. So that’s very much your family space. And at the back of that you’ve got a playroom. So now you’ve got clear functions and that makes it much more usable.”

A property with both features combined—space and function, are more likely to attract more buyers or tenants, that is, if they know what they’re looking for. Basically, investing in a property with all the right spaces will open more opportunities for traffic and aesthetic elements. But if you’re having trouble using the spaces in your property to their full potential, you can ask designers for help. Professional assistance will be your best option before putting the property up for rent or sale.

Toby JohncoxOne thing I see in Dubai all the time, where real estate is just much bigger than in the UK, is endless corridors and open spaces with no real functionality. And you just feel like you’re in a school or a shopping mall. But utilising the space and creating functionality gives massive value.”

Because of the functionality and value that flats offer, people with varying lifestyles, needs, and interests can make the most of their properties. So if you’re planning to invest in real estate and use the property as a source of income, make sure to prioritise this feature. For investors who are new to the London real estate market and don’t want to rush into a hasty purchase, there are serviced and self-catering luxury flats in London that can be rented for short periods of time through online websites like Homelike.

Nicolas Roux You’re right especially in London, we’ve got smaller properties than other places in the world. It’s also trying to get rid of some of these circulation issues or incorporate circulation with your actual rooms. So it makes much more sense in the way you use the space. Continuing with the example of the 4 story house, on the first floor you’ve got an existing bedroom one, bedroom two and a bathroom. You can add value by creating an en-suite bathroom which makes it much more appealing. And if you can create an en-suite to all of the bedrooms and also a master dressing room, all of those elements will definitely add value to any property. If you can install en-suite bathrooms and separate dressing rooms to all of your bedrooms, that’s a real winner.”

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