In this article we will provide you with an insight into the buy-to-let basics, from our guest writer from Why Property Works, Hazel De Kloe.
As a new year dawns, it brings with it great opportunity in the property market. This article is the second of a 3-part series about Buy-to-Let basics and will cover what to consider during the sourcing and acquisition process of your next property purchase. As previously discussed, and for myriad reasons, this time of year is one of the best for stepping into the market and finding your next property deal.
1. Sourcing Property
There are a multitude of ways to source your ideal property. Typically, we rely on estate agents to bring us properties to the market. It is important, when developing relationships with the agents, to be professional, friendly and do what we say we're going to do. Common courtesy goes a long way and simple things like giving feedback on a viewing or thinking of ways to help the agent will put you a long way into their good books. As an agent starts to understand what you are looking for and you are able to prove your ability to proceed with a purchase, you will find yourself in the position of being one of the first people they ring if a potentially good deal comes in. Remember that they can be the first to know about properties going to auction and corporate sales (i.e. repossessions). Be aware that this can take time to develop, however it is worth the effort. If you are looking to source 'off market' there are a number of ways you can advertise yourself to motivated sellers. I have sourced deals through newspaper adverts, postcard adverts in shop windows, leaflets, the internet and word of mouth. When you get more creative then you can think of numerous ways to find property. One of my clients sourced 2 amazing deals from one postcard advert in a local supermarket. She bought the properties for £80,000 and £81,500 respectively and their values were £110,000 and £115,000 with rental values of £750 pcm (per calendar month) each. Not bad for a morning's work (well OK - slightly more than that!) Anyway, the point I want to make here is that if you go looking, the deals are there. All you have to do is know where
2. Viewing and Evaluating
It is crucial to take notes when you are at a viewing, especially if you have back-to-back properties lined up. Making a comprehensive list of potential works needed at a property will help you later on to work out your offer price. It can also be useful to take photos to help you remember, but only with the vendor or agent's permission as it can make some people feel uncomfortable. I normally make notes on the property particulars the agent has already given me, however you could take a separate sheet with a list of things to check. Most important to note are:
- The condition of the exterior, i.e. roof, soffits, fascias and guttering, pointing, wall alignment, garden, pathways and driveways, etc
- Condition of internal walls
- Decorative condition
- Kitchen and bathroom
- Any signs of leakage, rot or damp (I find it extremely useful to take a damp meter with me!)
- Central heating system (if applicable)
- State of the electrics and rest of the plumbing
- Condition of floors (if 'bouncy', this could indicate rot, etc)
- Windows - single or double-glazed?
- Potential to reconfigure the layout (subject to relevant council consents)
- Neighbouring properties condition
- Proximity to local amenities
- Any potentially off-putting features or buildings in the vicinity?
Once you have determined the condition of the property, you can start to evaluate the potential cost of repair or replacement of those items.
Once you have completed your research and due diligence on the property (to include finding out about the vendor's position, reason for sale, others' interest in the property, any other offers, checked out the area to ensure it fits your strategy, checked with the council re any planning issues, found out about potential mortgage costs and rental or sale figures, worked out proper calculations for any refurbishment, etc) then you can start negotiating. Of course, negotiation is an art in itself, so I highly recommend you read up as much you can on the subject. Each person develops their own 'style' when negotiating and for best results it has to 'sit right' with you in order for your offer to come across successfully. As a brief insight, I have always found that starting with the reasons why
I am making the offer before mentioning my offer price works best for me. You are setting the scene for your offer and It's almost like you are making your excuses upfront rather than 'at the back end' which can seem weak. If you have done it correctly, they should not accept your first offer! The skill comes then in being able to make the deal work for everyone, thus creating the win/win.
4. The Buying Process
When you have successfully negotiated on your property, it is time to take action and buy it! Believe me, when you have secured a good deal, it is best to tie it up as quickly as you possibly can. In England and Wales the deal is not done until you exchange contracts. Having a good conveyancing solicitor and mortgage broker in your team are vital to ensure swift work is made of finally acquiring the property. This process typically takes 4 weeks, however it depends on whether there is a chain involved, how good the vendor's solicitor is and how long any mortgage offers take to come through. A transaction can be completed much quicker, for example only a few days. This is not for the faint-hearted and only on the recommendation of an investor and solicitor who really know what they're doing!
If you are in the market to buy your next property, then I wish you all the best in your search. I look forward to sharing with you 'The Business End' in the final part of this mini-series next month.
With all best wishes for 2014,
Hazel de Kloe – Why Property Works
For more information on buy-to-let, look to our recent articles on http://www.martinco.com/news/