The Ultimate Guide to Investing in Buy to Let Property
Buy to Let is the traditional property investing strategy, tried and tested for generations.
Regardless of market conditions/prop cycle/economy, cash flow on any property is what you should focus to make a return in any market.
Where The Money is: With Vanilla Buy To Lets the money is in the rental return and the growth in equity (value) in the property.
The Situation it’s Best For: Often best suited for Investors with cash to get started to use for deposits, purchase costs and contingency.
Timeframe: 2-4 Months to get up and running
Typically need at least 8% yield per property.
(Mortgage + purchase costs / gross rental yield).
This is typically double what you pay as mortgage costs per year, which should provide a decent NET rental income.Ideally, look for a 15% to 25% discount to market value when you buy. Learning to negotiate on price is a vital skill to develop to increase income. Place a lower initial offer.
If you can try to source properties where the vendor wants or needs to sell without an estate agent. This means they don’t have to pay estate agency fees and you can can negotiate a better price
If sourcing property without an estate agent, understand the vendors’ situation so you can make the best offer price.
Negotiate the best price for you! Negotiate hard with estate agents.
Time Frame – 2 to 4 months
Finding a suitable property may take a few weeks
Most sales through estate agents take 8 to 12 weeks
If found by dealing directly with a vendor it could take 4 to 8 weeks
Return in Investment (ROI)
Equity is created by…
Buying at a discount
Adding value with refurbishments
Capital growth in property prices
Ideally, you are looking for a combination of rental income and equity (your share of the property) to max out the ROI. For equity ideally look to negotiate the purchase at a discount of 15% to 25%.
Look for properties that give you a minimum rental income of £200 PCM.
Gross Rental Yield
Yearly rental income / total investment * 100 = gross rental yield
For example:
£6000 (yearly rental income) / £100,000 (total investment) * 100 = 6% (gross rental yield)
Your total investment should include how much it has cost you to buy the property including legal fees, refurbishment costs, your mortgage and everything else that you have paid out for in the property purchase.
Example
Without adding any house price growth or value through refurbishment you make an instant ROI of 66%
An 8.5% ROI in the first year is not bad at all. Getting a guaranteed 8 or 9% from stock market dividends would be pretty hard if not impossible to achieve
Common BTL Mistakes
You don’t have to buy the first property you view.
Don’t ‘fall in love’ with the property.
Do a thorough valuation assessment of the property comparing similar properties recent sales price in the street or area.
Place a lower initial offer. Negotiation is expected by estate agents. Tip… decide on your offer and take 10% off
If you need to pull out of a deal for whatever reason then pull out of it. You don’t owe anything to the estate agent or vendor. Be thick-skinned when you need to be.
When sourcing its not all about tenant profile. Take all factors into consideration.
No exit strategy. The exit strategy needs to be considered BEFORE purchasing a BTL. Have more than one exit strategy (…in case you need a plan b exit).
many new investors tend to choose an area because they live near to it or have heard good things, this is seldom the best approach. when you are looking at a particular location you need to be considering things like demographics, homeownership density versus social housing and tenant demand.
Tenants Profile
To start out it would might be best to aim for a professional tenant which is the most prevalent type of tenant in the UK. Accepting students is also an option as they are agreed with a guarantor.
Benefits/Social lets are also an option. Some times stigmatised somewhat, but these tenant profiles work out more often than not.
Benefits/Social lets however, do come with extra rules and regulations. So these type of lets are probably more suitable for an experienced landlord.
Student tenants tend to have fewer voids than other tenant profile types, but typically Jan Feb are times of year students are looking most for lets.
Are you aiming for a single-let, for a couple, a family, an individual? Perhaps it is going to be a multi-let or a student house? This will influence the size of the property you need, the cost, the availability of purchase and so on.
Make sure that there is a local demand for housing from your chosen tenant group….
a student HMO is not going to work in a town with no students . Local high unemployment might pose a problem with professional tenants. Demand can also be curtailed by an excess in supply….
Choosing a tenant profile is not indistinct from choosing your location.
Management
Ideally, you want a managing/letting agent to manage the let for you as the requirements have increased and it can be a time-consuming process. Professional and Student managing agents are more prevalent, and more straight forward that Social housing let, so again, another reason to target this type of let if you are starting out.
Benefits lets are quite a complex process when it comes to management. A local letting agent would be needed for this
Tips
Think about the potential for longer term capital growth when you source your BTL. This could potentially give you a much greater long term ROI. select the right area with the potential for capital growth. ( Thinks level of sales (demand) for the area and business/government investment in the area. Also the greater the level of home ownership in an area as opposed to rentals and/or social housing, is more likely to see longer term capital growth.
Working/Professional tenants are generally seen as more stable tenants.
Stick to small scale refurbishments or no refurbs when starting out in property investment.
Try to buy at a discount (below market value) as this provides a greater potential for long term ROI. (15% to 25% is ideal). The sweet spot is to buy a ‘distressed Property’ from a ‘distressed seller’ ( and for the real icing on the cake… in a ‘distressed’ market i.e. when prices have fallen or are in the process of falling, for example during a recession)
Robs 7 fundamental rules for any prop strategy
Follow these rules for any property investment
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Be Careful!
It’s important to note, regardless of what anyone says, it’s impossible to predict capital growth.
This isn’t to say you can’t or shouldn’t make predictions and it isn’t to say that people make predictions all the time that turn out to be entirely accurate.
But just remember that predictions are just that, they aren’t going to come good every time and all markets can turn, quickly.
If you end up buying a property, expecting (and relying on) growth that never comes, you’ll be joining a long list of investors who have experienced exactly that.
Anticipating Growth
Of course, we are not suggesting for a moment that you should ignore growth or fail to factor it into your decision making, just that you should be prepared for any predictions you make to be inaccurate.
In-order to best-anticipate capital growth for a given area we would always look at population growth and local investment, first.
These two factors will give you a pretty good indication of the economic trajectory that a location is on and researching something like this is relatively easy, as most of the data you will need can typically be found on local council websites.
Another thing that an investor can examine is, of course, 5-year and 10-year growth figures for the area but this will only give you a snapshot. It’s historical data, after-all, that doesn’t tell you anything about the present or the future.
In truth, however, there isn’t a particular, turn-key process to follow, just by-nature of every location being different.
So, if capital growth is something you want to focus on then great. You just need to make sure you understand an area, completely. Read everything and gather as much data as you can.
But be careful not to get yourself into a position where, if growth doesn’t happen, your investment ceases to be profitable for you.
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======= exit strategy =======
Before you can formulate your exit strategy, you will want a good idea about what you want from the property, in a best-case scenario.
Considering the future of a property is very important.
Would you like to keep the property as part of a pension plan? Is the plan to sell it after five years and recycle the deposit? Is it something you want to leave to your children when you pass?
Everything needs thinking about and the future is never going to turn out perfectly.
And your ideal scenario might not work out. There might be many reasons why you have to free yourself from a property quickly and you need to know your options for doing so.
Top of the list is knowing who you are going to sell your property to.
If you are taking a house and converting it into an HMO, for instance, then the market you are going to sell to (investors) is going to be very different to the market that you bought from (homeowners).
BTL tends to be strong on exit as there are multiple exit stratgies. You can sell on the open market or you could sel to investores as a BTL.
The last thing you want, when it comes to selling, is the realisation that you don’t have a plan in place for attracting the kind of buyer who would be interested in what you have.
And in a worst-case scenario, you might find yourself in a position where a property is costing you more money than it makes when selling it is going to involve more time and effort than you bargained for.
======= END exit strategy===============
===== Adding Value=====
Of the 7 Golden Rules, we outlined at the start of this section, this one is probably the one most open for interpretation and debate.
‘Adding value’ is something you hear a lot, in this industry and is a simple concept, illustrated by a good number of TV shows, that only show this one-aspect to property investment.
The idea is, of course, to refurbish a property, to the extent, that the property increases in value.
And some investors look for properties where they can achieve this, with success.
However, there are many that don’t go near this approach, due to there being a lot of unknowns inherent to it, including:
The overall cost of refurbishment.
The time to complete.
Additional and unpredictable costs with the improvements.
Finding the right team to help to work on the project.
At Property Investments UK we typically look for properties which we do not need to refurbish, though, naturally, when the right project comes along, we will go for it.
But wherever possible, we try to keep our up-front costs for our projects and investments, to a minimum.
And yet, the reasons why some investors seek out properties that can be done up, are logical and these projects can work well.
If you are able to increase the value of the property quickly and refinance or sell, there is money to be made from taking something like that on.
But the time/return factor is extremely important to get right and refurbishment work has a tendency to go on longer and cost more than initially expected.
Especially if your refurbishment team is not the best they could be or your project management skills are not completely on-point.
Refurbishment projects and ‘adding value’ can be a very good thing to engage in but when it is a business project, rather than a labour-of-love then you need to make sure that your numbers add up and your schedule, meticulously planned and followed to a ‘T’.
Otherwise, you could be facing an unprofitable and stressful venture.
===== END Adding Value=====
===Buying Below Market Value (BMV)====
The ability to purchase the right property, at the right price, is an essential building block of success in this game.
If you know what you are doing, when you are deciding what a particular property is worth, then that is going to give you the edge on vendors, whether they are estate agents or homeowners.
Learning how to assess a market value before a purchase – to ensure the best investment possible – is a skill that can be learned.
You have probably seen a lot of information online about below market value (BMV) properties.
And getting a discount on your purchase is a great thing to aim for.
However, you should never buy a property just because you know that it is being listed at a cheap price, compared to the local market.
In the past, we have secured property for around 30% BMV and those projects have not turned out so well.
This is because we were a little blindsided by the price and didn’t properly consider other issues, which ended up including:
The tenant profile in the area wasn’t what we wanted.
Capital growth in the area was almost non-existent.
So, if you are new to property, it is easy to get excited about a good discount but that aspect of the deal, should not be the only reason to buy it.
And you need to make sure you’ve considered all the other factors, we have discussed so far.
But yet, if you’re able to get a discount and purchase a property at below market value as well as ticking all the other boxes, then you should go for it!============
BMV cab be found by buying off-plan (or off-market)
portfolio sale
repossessions / receiver sale
Location, Location, Location
As we know from that infamous saying, choosing your location is key to success in property investment.
And the first thing you are going to have to decide is whether or not you want your new property to be local to you or elsewhere in the country.
There are pros and cons to each approach.
1) Staying Local
Some investors are most comfortable, investing in a property, close to where they live.
The yield might not be as good as it could be, the capital growth might not be as promising, the tenant profile might not exactly be what they are after.
Yet, some will be willing to take that hit, simply because they prefer the idea of being close by to their investments.
There’s nothing wrong with this.
If a landlord is planning on self-managing any aspect of the property themselves then it’s a good idea to keep things local.
But even when a landlord isn’t going to self-manage there is a certain peace of mind that comes with knowing that if they have any concerns they are able just to drive past and have a quick look.
Because some investors just find the idea of investing in a property, 100s of miles away, stressful.
And no one should ever make a commitment, as big as buying a house unless they are completely comfortable with the project ahead of them.
2) Going National?
Going national, however, opens up a great deal more opportunity.
By expanding their horizons, figuratively and literally, investors can choose areas of growth, higher yields and tenant types, more freely.
However, when a property is too far away, self-management becomes impossible.
And when there is a portfolio involved, with different properties in wildly different locations, that means an investor will have to be doing business with a variety of different management companies and agents.
This isn’t necessarily a problem but if you have five houses with five different management companies then this will likely be a very different and potentially more time-consuming experience, for an investor, than dealing with one local company that is able to manage everything.
Choosing Location
Location… Location… Location
There’s a reason why this is so important and often mentioned.
Get this wrong and you’re facing an uphill battle.
This video will show you the 9 Steps to getting it, bang on…
Investing in Apartments
Following all the things we have covered so far, the next thing to consider is the style of property you would like to invest in.
Apartments tend to be easy to maintain, nicely laid out, desirable for tenants and often they are to be found in great locations like a city centre.
However, there are always downsides to any type of investment.
For instance, most apartments are leasehold and this can be a tricky area of property law, where investors can and do get stung.
If you are thinking of investing in an apartment it is important to get good, legal advice and you can also check out the Leasehold Advisory Service.
You might also find that there is a managing agent who runs the building, who might cost you more than you would think, for their services.
So, before you invest you need to consider the following:
How long is the lease?
How much is the ground rent?
What are the management charges for the building?
What are the maintenance costs?
Where is the apartment located in the building and what impact might that have?
These are the main things you need to consider, on top of the investment fundamentals, already discussed, before buying an apartment.
Investing in Terraced Houses
For many areas of the UK, terraced houses are the main housing stock.
And terraces are often the main style of property that investors look at because they provide a good space for most types of tenant.
Terraced houses can vary in their design, room sizes and size of garden (or yard).
They do tend to be a good option for investors but there are things to look out for such as damp proofing.
Because a lot of terraced housing is quite old and there could be age-related issues, including problems that are not immediately obvious.
The last thing you want is an unexpected refurbishment project.
So, make sure when you are looking for houses on the property portals you actually visit the property too.
And with terraces, if you see a property advertised as a 3-bed, you will want to check the size of the third bedroom as these are often too small to be a practical bedroom for a tenant.
But with all that in mind, terraced housing can be fantastic for investors, especially for beginners.
So, while research and due care are always essential, they are certainly worth considering.
Investing in Semi-Detached Houses
Semi-detached houses are more limited in stock than terraced housing and they can cost a bit more.
However, if the location is right, they can be fantastic, long-term, family homes and that means you will be able to attract tenants who will stay in the property, for longer.
But if you are interested in the ‘family’ tenant profile then you need to realise that with this type of property, the maintenance costs are going to be a little higher.
Plus, the initial investment is usually higher, too.
These additional costs aren’t necessarily a bad thing but you need to have a good understanding of the costs involved before you commit to anything.
Semi-detached housing is usually easy to sell, as well.
And there are normally plenty of ways to ‘add value’ meaning an exit with a higher profit margin.
It all comes down to your strategy and what your overall aims are for the property.
Investing in Detached Houses
Detached houses are great, typically, for investors with a long-term strategy and tenants in such houses will usually pay a bit more in rent.
Of course, up-front, these houses usually cost more than the other property styles, so despite a higher rent, your rental yield may be the same or lower, than with a cheaper property.
You will want to check the potential for capital growth, as well.
(Values can go down, as well as up.)
With detached houses, being more expensive, you really need to do your homework because in a falling market, the more you have invested, the more you stand to lose.
Finding Properties that Have Been on the Market for a Long Time
By now you should have an idea about whether your property search is going to be local or national and you may have decided what kind of property you are looking for.
Next, you will need to shortlist some properties to look at in more detail, later on.
And one of the things you could be looking for, are properties that have been listed for sale, for a long time.
Why?
Because when properties don’t sell, this doesn’t mean there is anything wrong with them.
However, it could mean a homeowner who is willing to drop the price, to finally achieve a sale (a motivated seller).
So, in this lesson, we are going to look at how you can find properties that have been on the market for a long time and create a shortlist of possible options.
We’re going to use Rightmove, so first-thing-first you will need a Rightmove account (so you can save what you find in a list).
The steps to follow are:
Create your Rightmove account.
Search for your desired location.
Use the filters to narrow down your preferences (cost, property type, location etc).
Look at the results that appear after the ‘featured property’ at the top.
Filter the list by ‘oldest listed’.
Use the ‘heart’ shape next to the property to add search results to your shortlist, to review later.
When you look at the properties that appear on the page, you will notice that you can see the ‘date posted’ by the agent.
This tells you how long a property has been on the market.
When a property is struggling to sell, this is generally because it has been misrepresented or mismarketed.
Sometimes the price is too high or sometimes the descriptions have been a bit off.
Whatever the reason, such properties can make for good investment opportunities. Opportunities that others have missed.
We will be looking at how to further assess these properties, in upcoming videos.
But for now, just remember that properties which have been on the market for a long time are worth your attention.
How to Find Properties that have Recently Dropped in Price
Similar to finding properties that have been on the market for a long time, recent price drops on a listing could be an indicator that the homeowner is very keen to sell (is motivated).
In our experience, the best property portal for finding these price drops is Zoopla.
(Although it is best to be aware that there are fewer properties listed on Zoopla, than on other platforms.)
As is similar to Rightmove, when you search the Zoopla portal you can use search filters to find the kinds of property and locations you are interested in.
In this case, however, when you have your search results, you will want to use the filter that says, ‘Most Reduced’, to show you both the dates when those properties have seen a price drop and the amount they have dropped by (since they were first listed), as a percentage.
Bear in mind, a 50% reduction does not mean that the property price was dropped by 50% in one go. The difference is between the current date and the date that the property was first listed.
The next step is simply to read the descriptions and think. Can you make any guesses about why the price reduction occurred?
When you do this, there will always be one-or-two properties that stand out, meriting further investigation
Remember, at this point, you are only building your shortlist. If you have a feeling that a price change could indicate a motivated seller, then that property is worth saving, for now.
Finding Properties where Sales have Fallen Through
This is one of our favourite ways of finding properties, where sellers are likely to be highly motivated.
As we hope we’ve made clear, this is an important aspect of looking for investment opportunities and a great way of procuring property at a discount.
When you are looking for properties where a sale has fallen through, in our experience, Rightmove is the best platform to use.
NB If you’ve already built a shortlist from the previous lesson on finding properties that have been on the market for a long time, we advise that you create an entirely new Rightmove account for the shortlist we will create in this lesson.
That way you can keep your lists separate.
The process is as follows:
Search for your desired location.
Use the filters to narrow down results so they are relevant to you.
Keep scrolling through the results until you find ones which have for example ‘Sold Subject To Contract (STC)’ or ‘Under Offer’ within the property details
Click on the heart icon to add them to saved properties.
Revisit these properties over the following days and weeks.
All the properties, now saved in your account will have an ‘under offer’ or ‘sold STC’ tag next to them.
But if you spot that a tag has been removed from a listing, then you know that the sale has (likely) fallen through.
Not only would this likely mean a frustrated seller but it also gives you the means to investigate further.
By picking up the phone and speaking to the agent or the seller and asking what happened to the sale you may glean important information about the property.
Should you then go on and negotiate a price, this information could end up being very useful.
How to Find Properties that have been Wrongly Priced
Finding properties that are on the market at the ‘wrong’ price is a great way of discovering those below market value deals.
For this, we recommend using Rightmove.
As in previous lessons, you will need to go to Rightmove and filter for your desired property type and location.
However, don’t select a price range, yet.
To do this, we will be using the map listing to examine the opportunities as they present themselves.
It is helpful if you are already familiar with the area you are looking at. If not, then it isn’t a problem but it will take you longer to understand the data.
What you are looking for, on the map, are similar properties that are close together, that are very different in price.
In the video above, Rob has found two similar properties for sale, with a price difference of £17,000 – an amount, not to be sniffed at.
As a rule of thumb, a difference of 5%, is probably worth further investigation.
But of course, a large price difference between properties that are close to each other, would not necessarily mean that one is wrongly priced.
And this is why it is important to build up a mental picture of the area and really get to grips with how it is put together in terms of amenities, culture and ultimately house values.
Keep at it and you will start to spot mismatched properties which you can save to a shortlist, giving you a good starting point from which to take things to the next stage.
When You Are Out Viewing Property
When you are out viewing a property for the first time, the trick is not to be overwhelmed.
Remember, you don’t have to check everything, there and then. You can arrange second or third viewings to make sure your ‘I’s are dotted and your ‘T’s are crossed.
We would recommend that you don’t really use the first viewing as a way to check the property, as such, but as an opportunity to build a rapport with the agent or homeowner.
This rapport will stand you in good stead, later on.
Breaking it Down
You don’t need to do everything in the first viewing – It is best just to focus on building a good rapport with the agent or homeowner.
Now that you’ve built a good rapport it gives you a great opportunity to have a second viewing where you can look at things in a bit more detail. If required, this is a great time for you to bring someone along with you from your refurbishment team.
Some other tips to use during your first viewing include:
Letting the agent/homeowner know what your buying position is.
Letting them know how quickly you want to (and can) buy the property.
Letting them know about any other properties you are considering.
One thing, you really want to avoid, is getting into a discussion about price, while you are at the property.
When you are viewing a property there are going to be many thoughts rushing through your mind and the last thing you want to do is weaken your position by saying something you may later regret.
The best thing to do is to take your time and when at home gather your thoughts and do more research.
That way, when you finally put in your offer, it is something that you have properly considered.
Download Our Condition Report For Your Use
>>> Download this condition report to use on your viewings <<<
This document is designed to help you make notes when you are viewing a property and can be especially useful if you are viewing several properties in a short period of time.
You don’t want to forget about something important, after all!
This sheet will help you take notes on the:
Electrics
Central heating
Windows & doors
Roofs & gutters
Damp
Lounge
Dining room
Hall and Stairs
Kitchen
Bedroom 1
Bedroom 2
Bedroom 3
Bedroom 4
Bathroom 1
Bathroom 2
Gardens
Each of the rooms and elements above could have numerous issues that you will need to take a note of and consider.
These might include room sizes or noticeable damage.
The most important thing is to write everything down during your viewing. That way, once you are home, you can look back over your notes.
Because memory is a fickle thing and we forget the things that, at the time, we were certain we would remember.
But, even if you miss something in your notes, don’t worry.
If you have a good enough rapport with the agent/seller, there is not going any problem with you popping back and checking something over again.
Property Values
In this lesson, we will be looking at how to asses the potential value of a property.
Of course, when you have a specific property in mind, a surveyor will provide you with a lot of information and nothing here can replace the value that a surveyor can bring to the table.
However, the method here can give you a pretty good starting point for a valuation.
We will be using Rightmove again.
You’ll need to set a wide price range and search properties in the area.
Then, using the map feature, click on other properties and see what they are selling for.
From this, you will be able to get an average price for houses in the area (there will be outliers but all you want is a starting point).
Afterwards, you will need to navigate to ‘sold house prices’ to see the properties that have sold in the area and for what price.
Then combine your two averages and you will have a complete picture of house prices in the area.
By doing this you will have a decent understanding of house prices, which will help you when you are preparing your offer.
A Comparison of Local Rents
In this lesson, we will be looking at how to make comparisons on rental prices, in a given area.
Doing this will help you calculate average local rents, from which you can build the forecasting you’ll need for your property project.
Again, we’ll be using Rightmove.
Using the maps feature, search the area you’re looking to invest in and then find the rental cost of properties nearby.
This will help you understand the lower, upper and average rental costs for properties in the area.
However, forecasting your potential for rental income is very important.
So, you can’t just want to rely on what Rightmove is telling you, especially if you don’t see many results.
Make sure you’ve done your homework and speak to local estate agents. You need to make sure that you understand the bigger picture.
The Bigger Picture
>>> Download the document here <<<
This has been created purely to help you build a bigger picture of the numbers that you can achieve in properties that are listed.
Please note: We can’t stress this enough. You need to make sure that you do your research and speak to the relevant professionals. This document is only intended to help you lay some foundations for your research.
However, using this document you will be able to calculate the figures for your buy-to-let, accounting for the income and expenses associated with it.
And once you have those figures, you will be able to get a fair idea whether any given investment property is the right one for you!
Key Team Members – Mortgage Brokers
Choosing the right mortgage broker is going to be key to helping you find the best deal possible.
Banks and lenders typically won’t be able to get access to as many mortgage packages as a mortgage broker.
And a good mortgage broker will take the time to talk you through all the available options.
With more choice, you are more likely to get a deal that best suits your circumstances.
When you approach a mortgage broker you need to consider the following:
Are they an independent?
Are there good reasons not to go to a broker? (For, instance because of a pre-existing relationship between an estate agent and a particular lender.)
Are the broker’s clients mainly investors and landlords?
In terms of finding the best mortgage broker for you, nothing beats a personal referral or recommendation.
However, you can also have a look for brokers who are members of trade bodies and associations.
Financial advisors may also be able to point you in the right direction.
Things you should find out and questions to ask:
Do they cover the whole market?
Where do they earn your fees?
If they charge, during what stage of the process do they do so?
Do they have experience of commercial finance?
What products would they recommend for a buy-and-hold investment strategy?
Do they have many investor and landlord clients?
Key Team Members – Conveyancers and Solicitors
In property, there are two main functions that a solicitor serves.
Firstly, a solicitor will help you ensure that your contracts have been set up correctly. The last thing you want to experience is the discovery that the contracts between you and your tenants are void or not what you expected.
Secondly, there are solicitors who carry out conveyancing – the legal process surrounding the purchase of a property.
For all legal matters, whilst it may seem like a cheaper and more convenient approach, we strongly recommend that you don’t use any free, contract templates that you find online.
You get what you pay for and if your legal position is compromised, you may live to regret it.
Choosing A Solicitor
Make sure, when picking a solicitor, that they have the background and experience in the area in which you need them to help you.
This means your legal advice has to match your strategy. If it’s buy-to-let, ideally, a solicitor should have the necessary experience, in that area. If you are looking at investing in an HMO, then a different solicitor may be required.
By doing this you will, likely, have to pay the solicitor a greater hourly rate but in the long run, it will be worth it.
NB – It is, generally, not a good idea to employ the services of a solicitor who is tied to an estate agent.
Go Local
We try to pick solicitors who are local to the property because they will be more aware of the quirks of that area.
A solicitor who lives on the opposite side of the country might not be as aware of issues, that are specific to a particular region, than one who lives and works there.
When you are looking for a solicitor, there are websites that can be useful, including:-
Questions to ask a solicitor before hiring them could include:
Do you work with many investors or landlords?
Can you recommend any local estate agents?
What is your caseload like at the moment?
Have you dealt with repossessions before?
Who will be the main contact if we work together?
Key Team Members – Letting Agents
Unlike solicitors, letting agents are optional. You can manage your tenants and the upkeep of the property, yourself.
However, in our experience, a letting agent is going to save you a lot of time and by using them, beginners can avoid making a few, potentially expensive, mistakes.
And if your goal is to grow your property portfolio as fast as possible then using letting agents is going to help you achieve that end, much quicker.
Simply, by clearing the day-to-day management of your properties from your schedule, you will have more time to focus on your end-goals and ambitions, more completely.
There are two main things to think about when you are choosing a letting agent:
Do they have specialist experience, in-line with your investment strategy?
How far away are their offices from your target area?
There isn’t a right or wrong answer to these questions.
Cards-on-the-table, we’ve always found small, local agents, closeby to our properties, to generally deliver a better service.
And yet, this is only an anecdote. The trick is to find a company, with whom you feel comfortable, whatever their size and (to an extent), whatever their location.
But how do you go about finding a good letting agent?
It can be difficult, for sure.
The best advice is to try and get personal referrals and recommendations. Don’t be afraid to pick up the phone and talk to people about their experiences.
But failing that, we recommend looking at associations and regulated bodies such as:
When you are considering a letting agent, you should always ask questions, including, the following:
What areas do you mainly cover?
Do you deal with housing benefit? Working tenants? Students?
Do you specialise in any type of tenant profile?
Do you manage any HMO properties?
What are your let-only and management fees for single and multi lets?
What are your tenant application fees?
Do you change tenant renewal fees during their tenancy?
How do you manage tenants, are they all under one tenancy agreement?
How long have you been running, as a letting agent?
How many properties do you manage, how many staff do you have?
If a tenant doesn’t pay their rent on time what process do you follow?
Who do you register your deposits with?
Are you a member of ARLA?
Key Team Members – Refurbishment Teams
You are going to have to find a trusted refurbishment team.
Even if you don’t need to refurbish your property, right at the beginning, maintenance work will still need doing, at some point.
When you’re starting out it can be difficult to find the best people.
But once you do find the right team, they will help save you money and free up your time, to spend on growing your business.
The main points to consider are:
Whether you would prefer to work with a one-man-band or full-service company?
Whether you want to manage the works yourself or leave them to it?
How skilled (and qualified) do they need to be?
Finding the Right People
As always, personal recommendations are a great way to find your refurbishment and maintenance team.
Failing that you can refer to professional associations and trade bodies, such as:
And then, the final tried and tested way to find traders, nowadays, is online.
You can use review-sites like Trustpilot to give you an idea of who could be a good fit, for your properties.
Questions to ask of a prospective refurbishment team could include:
Are you a member of any trade body associations?
What trades/jobs do you do?
Can you provide any referrals from clients, you have recently work with?
Do you do emergency call-outs?
What is your current work schedule like at the moment?
What are your payment terms?
Do you charge a set hourly-rate or per job?
Do you work for any other landlords?
Buying the Property
In this, penultimate lesson, we will be looking at the sales process, itself.
The process of buying a property is driven, first-and-foremost, by conveyancing solicitors and most of it goes on behind the scenes.
But it is helpful, for investors, to know what is going on, when it comes to conveyancing, which is, ultimately, the legal process, underpinning the process of buying a house.
For a breakdown of the stages that make up the conveyancing process we recommend this article:
The conveyancing process can be slow but there are things you can do, as an investor, to speed it up.
And speeding it up can be important. The last thing you want is to have a property sale fall through because your solicitors are taking too long.
Things to think about, include:
Solicitors like to send letters – Phone them to make sure you understand what is happening and if there is anything yoy can do to help them.
Always keep in touch with your vendor.
Give your solicitor a target date to aim for (an average sale takes 8-12 weeks to complete).
The truth is, If you are on top of everything, you can shave 3-6 weeks from the sales process.
Don’t get overwhelmed, as with all things, there’s a learning curve involved in mastering the art of speeding up a sale.
And that’s why having the right team around can help you.
Surveys
If you’re buying with cash, rather than with a mortgage, then you should still consider a survey.
You still want to ensure that the property has been valued, correctly.
There are different types of surveys, to consider, depending on the situation.
A survey can help minimise your risks by:
Helping you value the property, correctly
Saving you money, spotting any significant issues with the property, early on.