Buying a property for investment is an exciting project but it can also be quite daunting. Here are some tips that may help you through the process.
Seek some independent financial advice so you can set a realistic budget you can afford. This budget should include the sale price of the property, purchasing costs such as solicitor or conveyancing fees, survey fees, stamp duty, second home tax (stamp duty plus 3%), costs of any repairs, costs of preparing the property for rental such as electrical report, EPC, installation of smoke detectors, any furniture or white goods and any new carpets. Deduct these costs from your overall budget. It will be impossible to make an accurate list without a particular property in mind but at least it will give you an idea of what you can afford to buy
Once you have a budget in mind, think about the type of tenant you wish to attract and the location to concentrate your search in. It is helpful to consider both together. For example, if you are aiming for a student let, buying close to the university in an area where there are other student properties is an option because students like to be living close to each other and to where they study they also download a lot of data so being in an area with a good broadband connection is important. For families look at areas that have good schooling and facilities like parks close by, for professional sharers good transport links are a helpful selling point.
When you have thoroughly researched the location where you wish to buy an investment property, the type of tenant you are aiming for, have calculated your budget you may be ready to start looking at properties.
Most properties for sale are advertised on the internet and this is a great place to begin however if you have the time and can manage to visit all the local estate agents and build relationships with them you are more likely to find out about properties before they are advertised or if a sale falls through and another buyer is needed. I would strongly recommend ringing each agent every week to ask if they have any new properties coming on the market soon, it will not take long for them to remember your name so there is a higher chance of them ringing you when a suitable property arises.
Unless you are a cash buyer or have other income to cover mortgage payments, look for a well-maintained property that you can let out almost immediately to generate cash flow. This way you can cover mortgage costs and hopefully save up to make repairs and adapt the property as finances allow. There are often tenants looking for 6 – 12 month lets so you could slowly build up a reserve of cash and make improvements to the property over time in-between tenancies.
Before a viewing, have a look at the floor plan and see if the room sizes are big enough for the tenants you wish to attract. The government provide information about HMO minimum room sizes if you are planning to have 5 or more students or professional sharers. If a room is too small think about how much it would cost to make it bigger and any permissions required.
Spend time in the property looking at the plumbing, electrics and wiring, signs of damp, condition of the windows and large cracks in areas such as bay windows, end of terrace walls or where an extension joins the main house as these can be a sign of structural problems. Small hairline cracks are usually a sign of plaster shrinkage and are not normally an issue but instruct a surveyor to inspect the property on your behalf to identify major repairs. If there is outside space, small low maintenance gardens are preferable. Is there anything that could put tenants off such as a noisy road, smell from a dump or being next door to an electricity substation?
Don’t rush into a purchase, think about all the costs and the amount of work and time required getting the property ready. Buying a property for rental is a long term investment and can be risky but play your cards right and you could have a great little earner.
If you are looking for a Surveyor, you may find some of these links useful:
I want a local surveyor to do a Building Survey for me
Find local help with Damp and Timber Reports
I want a local surveyor to do a homebuyer survey for me
Find local experts and compare prices
If you need a Valuation Survey
Find local experts and compare prices
I want to find a local surveyor to do an Asbestos Survey for me
If you are looking for a CCTV Drain Survey
Find an Electrician to produce an Electrical report (sometimes known as an Electrical Installation Condition Report - or EICR) for a property.