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How To Buy An Investment Property

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In an article in January 2015 and quoting the Council of Mortgage Lenders, Landlord Zone reported that the number of buy to let mortgages has risen by 10% in just one year and that a total of £2.4 billion was advanced in November 2014 alone.

If you are interested in joining this band of private sector landlords, you have probably done your research on the general location of your buy to let property, its size and condition, and made all the calculations likely to determine whether the investment turns into a financial success.

It might be helpful, therefore, to look at just what is involved in the process of buying your investment property and the particular considerations to be taken into account depending on the method you choose.

Mortgages and Insurance

First, though, there are important preparations you might want to take whatever method you choose to actually buy the property:

  • mortgage – however you are intending to buy, you need to pay the purchase price and this invariably involves your arranging a mortgage;
  • the earlier you are able to approach a buy to let mortgage lender and secure an agreement in principle for the advance – based on your business plan for making the enterprise financially viable – the sooner you are likely to gain the confidence to go ahead with buying your chosen property;
  • insurance – from the moment you acquire your buy to let property, irrespective of whether you are planning to refurbish or remodel the dwelling or dwellings, you are likely to want to ensure that it is adequately protected by landlord insurance;
  • early contact with your insurer, therefore, may once again provide welcome reassurance that this aspect of buy to let property ownership is readily taken care of.

How To Buy An Investment Property

Estate Agents

When you are ready to buy, one of the most traditional and conventional market places to explore is the local estate agent. According to the Consumers’ Association’s Which? magazine, both buyers and sellers have voiced a “widespread dissatisfaction” with estate agents, but they continue to play an important role in the housing market.

Much maligned they be – not least because of the often exaggerated and flowery descriptions of property they may give – but there is no doubting that a reputable local estate agent is likely to know the market well, both in terms of selling prices and of estimated rental incomes.

You might want to contact as many of them as you are able to find in the Yellow Pages, therefore. Remember that the more you are able to tell them what type of property you want, the funds you have available, and the rental income you hope to achieve, the more likely you are going to find the property that suits your plans.

Whenever you are dealing with an estate agent as a prospective buyer, it is important to remember that they are instructed by and charge their commission (typically around 1.5%) to the vendor. Their primary duty, therefore, is to the seller and not to you.

Remember, too, that when dealing with an estate agent, the speed with which you might proceed to completion of your purchase of a previously owner occupied home is also likely to be determined by the vendor’s plans in buying a replacement property – unless it is described as “chain free”.

Online Estate Agents

In addition to the conventional high street estate agent, there is also a growing band of online agents – sometimes offering much the same level of service as the former.

Although this portal may keep your property search at your fingertips, what you miss out on of course is the personal touch – which may prove invaluable if you ever want to discuss the finer details of your search or explore the background to any property which you might be interested in buying.

Website House Sales Listings

The internet has made it considerably easier for sellers to advertise property for sale. The we reaches a considerably larger audience than the more conventional listing in the classified ads listing of the local newspaper, but the principle is largely the same as traditional newspaper listing described, for example, by Property Market.

With any such listing, it is the vendor who has personally taken on all of the work traditionally done by an estate agent. Although the vendor still has a legal duty to avoid any form of misrepresentation in the description of the property or in answer to your questions about it, there may come a stage in the proceedings when you miss the professionalism otherwise brought to things by an estate agent.

Local Authorities

Local authorities occasionally have publicly owned property for sale to prospective landlords and many offer incentive schemes for the conversion of empty housing or unused commercial property into let accommodation of a decent standard.

The schemes differ from one part of the country to another, but to cite one example from the southwest, Cornwall Council’s efforts to revitalise such property includes:

  • low cost loans;
  • repair and lease schemes;
  • free planning application advice; and
  • other advice about bringing empty property into habitable use within the private rented sector.

Auction Sales

The fast track way of buying an investment property may be through one of the many auction sales periodically held around the country. The BBC programmeHomes Under the Hammer makes compelling reviewing but also illustrates how buying at auction literally takes just the minute or two that bidding lasts. It is therefore considerably quicker than the drawn out process you are likely to encounter in a sale through estate agents, private sales or councils.

What that means is that you need to be especially well prepared before entering the auction room and starting your bidding:

  • the catalogue compiled by the auctioneers is your principal guide to the properties on offer, so it repays you to go through this particularly carefully in advance, making notes and selecting those investment properties in which you might be interested;
  • next follows your viewing of each of the lots you have identified and the legal and planning searches for any in which you are especially interested;
  • well in advance of the day itself, make sure of the availability of adequate funds – a 10% deposit to be paid immediately after your successful bid on auction day and the balance no later than 28 days afterwards.

It is clear, therefore, that a purchase at auction may be over in just minutes – but when the gavel falls you are entering a contract no less binding than the contract you sign in any other form of property purchase. It pays to know exactly what you are doing before entering the fray of a property auction.