Type a location (eg. NW6 or Clapham or Turkey etc)
Buying Investment Property
Buying Investment Property With Tenants in Situ
Buying investment property with tenants already in place. This can be a good way to start on the ‘buy to let’ ladder. The benefit of these properties for
sale is that you can see how the property is already performing from a rental perspective. The landlord will be able to tell you if they have experienced many rental voids and how good
the demand has been for the property. The benefit to the buyer is that they don’t have the expense of sourcing tenants or the issue of the property being empty on completion and
the time delay prior to finding tenants.
Why would a landlord sell an investment property?
Despite it being fairly well known that we should always keep hold of an investment property, there are a number of reasons why landlords would chose to sell a buy to
let investment property. These include:
There may be a requirement to raise cash to fund other domestic expenses. With most buy to let mortgage lenders offering a maximum of 85% ltv on an investment property, this would
involve the landlord having 15% equity tied up in a property. Sometimes the only way to access this is to sell the property.
They may have reached an age or time in their life where they no longer want the responsibility.
Many landlords have mainstream jobs as well as managing their investment property portfolio. Redundancy can be another reason why a landlord may choose to sell a property if they
require additional funds whilst seeking alternative mainstream employment.
The landlord may be wishing to invest in an alternative area, perhaps more local to themselves, so may decide to sell existing properties to release the capital to investment elsewhere.
A new addition to the family. A new baby can often force the requirement to sell a property to release any capital that is tied up in it.
Divorce/Separation. It is a fact of life that there are more people getting divorced or separating. Many of these people might have had investment property in their joint names and
as part of the settlement may need to sell any properties held in joint names so that they are free to go their separate ways.
Buying investment property has become more and more popular over the years. Especially as many see it as a way of securing a better financial future for themselves and
their families. Knowing what property to purchase is one of the most important decisions you will make whether you are looking at getting involved in buy to let, or renovating a property.
Auctions
Buying property at auction can be a great place to find a bargain property, but it must also be recognized that it is not always the best place for
a first timer. Some properties can appear to be very cheap and some more naïve investors may commit to a purchase without even viewing the property in the hope that they can
secure a buy to let mortgage on it after they have left the auction room. However, with most auction companies stipulating that completion must take place within 28 days of the auction,
this may be a high risk approach.
Top tips for Buying at Auction
Highlight any properties that you are seriously considering and arrange viewings well in advance of the actual auction day.
Request the full solicitor pack that is normally accompanied with each property. This will highlight any legal issues that need to be addressed or that may determine your decision
as to whether to proceed or not.
Find out whether there are any tenants in situ and the agreement that they are on with the landlord. Check if there are any rent arrears.
Ensure that you get a valuation done on any properties that you are considering bidding on. This can be an expensive process but you need to know that a mortgage company would be
happy to lend on the property and at the figure you are expecting to pay.
Find out as much as you can about the area that the property is located in. For example, has there been an increase in building work, crime, planning permission granted for a motorway
at the end of the garden? These are all issues that need to be addressed.
Set your maximum limit that you are prepared to pay for the property ensuring that this adheres to the maximum you have been advised you can borrow from your mortgage lender or the
funds you have available.
If your bid is successful, ensure that you contact your mortgage company immediately so that they can get the necessary paperwork finalised for your purchase.
Advise your solicitor of your successful bid so that they in turn can prepare the necessary legal work ready for completion.
New build or re-sale property?
Knowing whether to buy a new build or a re-sale property is very much down to the individual landlords choice. However, there are considerations for both which need
to be taken into account.
New-Build
These can be modern state of the art buildings which can be particularly appealing to tenants looking for modern city living or modern urban housing. Tenants appreciate
moving into a brand new property as much as we would if it were a home for ourselves. Plus, tenants may be prepared to pay a bit extra for new modern facilities. However, the downside
to new build property is that quite often the properties can be located amongst numerous other newly built property and in respect of apartment blocks this can result in numerous properties
of the same build and structure being available at the same time which can make it a very competitive market place for landlords looking for tenants which can jeopardize potential rental
income if they are having to reduce monthly premiums to get their units occupied. Not only that but with so many new build properties in one area, how long will it be until that particular
development looks out of date in comparison to the next new development going up? In addition to this, it can’t be ignored that most investors will expect to pay a premium for a
new build property in the knowledge that there won’t be any immediate maintenance work required on them. But on a positive note, these properties generally require very little maintenance
and of course no outside space to maintain on many apartments. Plus, many of them will carry a NHBC certificate covering 10 years from completion.
Re-Sale
The upside of buying re-sale is that you are not paying a premium for the fact that it is newly built and the property has already established it’s own current
market value. On a re-sale property the local area is generally established so you will have a better idea of the tenants you are likely to attract. For example if you are looking at a
property in a university town, it may be more likely that you would consider letting to students, whereas an area with a number of local business parks may attract more professional couples
and families. But you may need to budget to allow for any ongoing maintenance work on a re-sale property that may be necessary.
House or Flat?
Again this is down to the landlords personal choice and what responsibilities they wish to take on and costs to consider.
House
Could be let to students, professional couple or family
Opportunity to update/extend / Loft conversion at a later date to add value
Slightly higher maintenance if property has garden
Flat
Most likely to be let to professional couple/sharers or corporate let.
Professional people may be away more often creating less wear and tear on a property.
