For first-time landlords the practical process of buying your first buy to let property can be an exciting and time-consuming challenge. Probably the most important factor in the whole process is timing. Volatile property prices mean that to achieve capital growth in the long run, you must be completely confident you're making your purchase at the low end of the market. If you've done your financial calculations and are confident now is the time to buy, the first step will be researching properties for sale.
Most people turn to online estate agents compare and contrast what properties are for sale and at what prices. Beware that there is usually a large gap between the asking price and the selling price. This gap can around 20% and widens during a property slump and narrows during boom times. Look for a property websites that advertise properties in auctions, private sellers advertising on portals, as well as off plan purchases, from new build developers. Although new builds are generally a bit more money, they are low maintenance. In addition to offset the impact of the credit crunch, many property developers are now offering financial incentives to assist investors first-time buyers with a mortgage offer linked to the sale of a new property. Just remember that if you do end up going through estate agent, that their commission is negotiable. As a private investor, you must be business minded in reducing all purchase and selling overheads wherever possible.
You should be targeting a specific local area, where you feel there is strong rental demand from a defined tenant sector. The location of your investment property is critical in attracting strong tenant demand. Most tenants move bear to where they work or at least access to good transport links so they can commute to work as quickly as possible. So many landlords target urban areas near train stations, universities, colleges, industry and business developments. It's also important you have a good local knowledge of the area you are targeting. So spend some time driving around to get a feel for it. There are also other points of interest which will attract the right type of tenant. These include the proximity local shops, leisure facilities (such as cinemas or sports centres), and the general gentrification of the area. No one wants to live in a crime ridden or rundown area.
The next step will be to view was many properties as possible in the area you have chosen. Try and go on as many viewings as possible, in order to have a broad range of comparison. Never just view two or three properties as this limits your mindset, as to the range of possible investment opportunities. You must have a very clear idea about the number of bedrooms and bathrooms tenants will expect. Make sure you make some notes as you go around on your viewings - as many properties look and feel the same.
Always go in daylight hours so you can make a proper inspection of the building. This includes checking for any structural defects, (such as broken pointing in the walls, whether damage to the roof or rotten timber framed structures or damaged window frames). You should try and spot any immediate maintenance issues, that would need to be undertaken before tenants would want to rent a property. But up a list of costs of likely building repairs. You may find that for older properties, the cost of repairs will push you over your investment budget. Lastly don't forget to check the locality of any nearby large trees. Tree roots can cause subsidence as well posing a risk to damaging your new buy to let property (should they fall over in a severe storm).
During the viewing listen carefully to what the estate agent tells you about the motives and plans of the seller. Of course their job is to talk up the opportunity, and present the building in its best possible light. Yet remember to question why the seller wants to sell, and whether there are any compelling drivers, that will mean you have to make an offer by a certain date. For instance they may be selling because they are moving jobs. Also ask on what basis the seller would be prepared to negotiate. Sometimes properties that are inherited from the deceased relative, are sold complete with the fixtures and furniture. As a consequence, there may be furniture that is of interest to you as a landlord. You may be able use these as part of the negotiation when buying the property.
Once you have found the buy to let property you want to make an offer on, you will need employ solicitor to carry out all the conveyancing work on your behalf. This include the preparation of contracts, payment of the stamp duty charges and land registry charges, as well as carry out local authority searches. There may be much correspondence going backwards and forwards between the sellers solicitor and your solicitor. So make sure your solicitor keeps you updated as to the progress of the sale. When you make your formal offer your solicitor will do it in writing. Your offer will be faxed or posted to the seller's solicitor and the estate agent.
Be prepared for the buying chain to collapse. Changes in the circumstances of sellers mean that they may receive a better offer, or pull out of the sale for other personal reasons. With this in mind you should wait a bit before procuring any building surveys. Likewise the seller will want to satisfy themselves that your buy to let mortgage has been provisionally approved. Many landlords choose not to undertake a full structural survey prior to completion. However if you are purchasing an older property, there are many areas where building repairs may push you over your budget. A full building survey will make specific recommendations and list out all of the faults found. These may include checks on the roof timbers, tests for damp, plumbing and electrical connections, and the possibility of subsidence and flood damage. It is a far more comprehensive report, which provides landlords with ammunition to renegotiate the price downwards if appropriate.
It is at this time when you will probably need to start shopping around for adequate buy to let insurance. This is a form of building insurance which is specifically designed for landlords who are purchasing investment property for rental purposes. Indeed you will not be able to get your buy to let mortgage company to approve your mortgage application, until an adequate building insurance policy is in place. Most policy wordings on UK landlord insurance policies are specifically designed to cater for the preconditions laid down by mortgage lenders. Most insurance companies will also want to sell you additional insurance options, when you take out your buy to let insurance policy. These are designed to mitigate risks associated with being a landlord. In particular you'll probably be offered rent guarantee insurance and legal expenses cover. Most business minded and risk averse landlords, tend to take out these relatively inexpensive insurance options, (as the cost of an unforeseen legal scenario or the possibility of having rental voids) - far outweighs the additional insurance costs.
Finally after about an average of 12 weeks, you are likely to be in a position to exchange contracts (once all of the legal, finance and insurance paperwork is in place). A completion date will be put in place soon after exchange of contracts. At this point you are risking losing your deposit should you change your mind, prior to completion. Most property sales contracts also have a penalty clause built in (to de-motivate the parties from pulling out at the last minute). Things will start to move quickly. The completion date will focus your mind and should energise you planning out the preparation of the property, so tenants can and will want to move into your new buy to let investment property.