There’s no getting around it: the process of buying & renting a property in the UK is long, complicated and frustrating.
It is enough to put off even the most experienced investors, and for first-time investors it can be extremely overwhelming and enough to end their investing journeys before they have even started. So today we thought we would give you an overview into the process of finding, buying and renting a buy-to-let property, with the aim of giving you an insight into how it all works.
1. Find Your Property
Researching the property market is one of the most vital aspects for finding the right location for your investment.
You should consider the strength of the location, the rental yields that are on offer, the level of demand and the potential for capital growth. It’s also important to look into areas that have positive predictions for price growth and a proven record of investment success. You must also consider any refurbishments that need to be carried out to the property as this will help in the calculation of your offer price.
The next thing to figure out when you’re looking for an investment property is who you want your ‘ideal’ tenant to be. This will help you determine things such as the type of property you purchase, house or flat, and whether you purchase in an urban or rural area. For example, if you want a young professional, are there good transport links? Or if you’d prefer a family, are there local schools nearby?
2. Make Sure You’re Ready To Buy
Once you’ve found your ideal property, you need to make sure you can actually complete the transaction and have the funds to purchase the property. You don’t want to burn bridges with your estate agent by having to pull out of a deal.
If you’re buying in cash, no problem; just make sure you have enough in the bank to cover the purchase and costs.
If you’re buying through a mortgage, ensure you have a Decision in Principle (DIP) from a lender as it helps the estate agent realise you are a serious buyer.
3. Make An Offer
You can make your offer either verbally or in writing, but we would advise reiterating the offer in writing. You should include the price you want to pay as well as any other factors that will put you in a positive light. A good one is that you’re an investment buyer, so you won’t have to sell a property first – so there’s no chain
4. Your Offer Is Accepted
After a bit of back-and-forth, all being well, you should hear from the estate agent saying your offer has been accepted!
The estate agent will provide you with a letter called a ‘memorandum of sale’ which confirms what has been agreed. They will also ask for details of your solicitor so that they can receive a copy of this letter and can get the ball rolling.
5. Instruct A Solicitor
Your solicitor will receive the ‘Memorandum of Sale’ so will know that something is happening, but you should also get in touch with them to see what they need from your side.
If you don’t have a solicitor yet, now is the time to get one! Here are just a few things to look out for when finding one:
- Get a fixed price for managing the transaction. They will ask you for details such as the purchase price, whether you’re buying as an individual or a company, whether you’re using a mortgage)
- If you require a fast completion, make sure they are aware from the very start and they can act quickly.
You will then need to sign a client engagement letter, and probably pay an advance to cover the costs such as ordering local searches and administration fees.
6. Arrange Your Mortgage
Next, tell your mortgage advisor that you’ve had an offer accepted, and they will get things moving on your behalf.
Your lender will need to know your solicitor’s details as they will arrange the legal aspects of the mortgage, the transaction itself as well as arranging for the valuation survey.
7. Get A Survey
If you’re purchasing your property using a mortgage, your lender will carry out a valuation survey of the property before they can formally approve your mortgage and release your funds.
You will need to give them access to the property and they will be looking to ensure that the property meets their lending criteria.
Whether you are buying in cash or mortgage, you can also get an additional survey done, either a full Building Survey or a HomeBuyers Report, which will show you if there are any concerns regarding the property that may end up costing you a small fortune to fix later on.
If you lack experience in inspecting properties and aren’t too sure what to look out for, it can give you piece of mind and a relatively cheap way of discovering any potential issues that may arise later on.
8. The Legal Process Begins
This is where the ability to be patient comes in. You want to buy, the sellers wants to sell, how hard can this bit be right?
Quite hard to be honest. Even though you may think not a lot is happening, there’s a lot that goes on behind the scenes from a legal perspective.
Your solicitor will order local searches, get an information pack from the freeholder (if the property is leasehold, review draft contracts and will review any information the seller has provided on the property.
Because there are so many parties involved, you should prepare yourself for months to go by and still not be much closer to owning the property.
Your job during this part of the process is to ‘project manage’. Find out where the hold-up is and keep ‘bugging’ the right person to do whatever it is that needs to be done. You should chase your solicitor at least once per week and then several times per week as you get closer to the finish line.
9. Prepare To Exchange
While all this has been going on with your solicitor, your mortgage lender will have looked at their valuation survey and will eventually issue a formal mortgage offer which will say when the funds will be available to you and give you a timeframe (often 3-6 months) to complete the purchase.
If the lender doesn’t issue an offer and pulls out, everything will be held up while you start all over again with a different lender.
All being well you will be able to agree to a date when you can exchange contracts and complete on the purchase.
Before the exchange date, your solicitor will ask you to send the money to cover the deposit.
On the agreed date of exchange, your solicitor will send the deposit to the seller’s solicitor. They will then formally ‘exchange contracts’ – making the purchase legally binding.
11. Complete & Collect Your Keys
The date for completion is set before you agree to exchange so sometimes your completion day can be the same day as you exchange contracts. But it could also be a few weeks later.
Before the completion date, your solicitor will request the remaining funds from your lender so that they are ready to send to the seller when you complete.
When the day of completion comes around, the funds will be transferred to the seller’s solicitor and the property will finally be yours!
You can now go and collect the keys to your new property.
12. The Refurb Begins
Even if you’re property doesn’t look too bad, you will need to ensure that it’s up to a good rental standard. Property refurbishment is one of the most important parts of property investment.
You will need to instruct a project manager, create a scope of work, get quotes & employ tradespeople, as well ensuring deadlines are hit to that you can get tenants in as soon as possible.
13. Finding A Tenant
Completing the sale and refurbing the property is only beginning. It’s now time to find a tenant for your investment.
Generally, buy-to-let property investors don’t want to spend time finding tenants for their property, so they will use a letting agent to market and find a tenant for their property but there is also the possibility of doing it yourself.
There are pros and cons to each method, and your decision will be based on how hands-on you want to be during the process. A letting agent will charge a commission-based fee (usually around 10%-15% of the annual rental, though this can be negotiated), and will take care of the entire process, from finding a tenant to referencing and contracts.
14. Don’t Forget About Your Insurance
Landlords will need to equip themselves with the relevant insurance before a tenant moves in. Some insurance is mandatory, while others are useful as extra protection. The type of insurance available for landlords include building insurance, landlord insurance and contents insurance
And that’s it – you are now a buy-to-let property investor!
As you can see finding, purchasing, refurbishing and letting an investment property takes A LOT of time, patience and hard work as it’s ultimately your responsibility to keep things ticking along. Do you really have the time, desire or knowledge to ensure that it’s a success?
But you don’t have to do it all on your own. Having a good team on your side really helps. There are companies out there (just like ours 😉) that take away the hassle of investing in property.
So, if you really want to invest in property but don’t have the time, headspace or desire to do all the work yourself, rest assured that there are people out there that can help.
Want to discuss how you can begin your own property investing journey in 2023, click here to schedule a free consultation with one of our team.