UK Investment Property

Methods of Buying UK Investment Property

There are several ways of buying investment properties in the UK. Here are some examples of where/how to secure profitable deals:

1. Buying Off-Plan through an investment club

2. Buying off plan direct from a builder

3. Buying from an auction

4. Buying via estate agents

5. Placing small ads in local papers

 

1. Purchasing UK investment property via a bulk-buy “investment club”

Personally, this used to be my least favourite way of buying UK investment property, but solutions are maturing and investors are seeing tangible results.

That said, some companies do it better than others, and my recommendation would be to check the facts very carefully before signing up to seminas or property clubs that charge for giving you the "golden nugget" that will turn you from novice to seasoned property investor in less time it will take to fill your tank with petrol.

Here is a look at my pros and cons of buying through property investment clubs:

Pros

There could be benefits to buying through a property clearing house/club if:

• the property is one of a small number being offered as investor properties (i.e. the bulk of the dwellings are being purchased by owner occupiers)
• there is extremely high demand for rental properties in the area and lots of competition isnt going to be problematic to the rental you can achieve
• the clearing house's charges aren’t so high that the total financial package makes the deal "ordinary"
• If the club provides a strong support network and focusses on high profit properties e.g not your average apartment

Cons

• You may get 10-15% off the RRP of the property, but the “club” you subscribe to will typically have subscription fees/service charges that can erode that margin, and the prices may be artificially high at the outset
• You may be tied to a mortgage broker and solicitors who are part of the “club” and who will charge high prices for their services
• You can find that you are instantly putting yourself into stiff competition with other investors. For first-time investors, this can make life very difficult and expensive
• You could get better deals yourself! (see below)

There are a few instances where it could pay to be in a “club” – e.g when buying a share in an apartment-hotel in Dubai, for instance. However, if you are simply buying into a large apartment block in the middle of a UK town/city, we would generally advise you to proceed with caution.

Instant competition can reduce the rental and sales values of your investment significantly, and could slow down the tenanting process. If you do go ahead then it’s highly recommended that you develop “additional value” into your investment to differentiate it from the competition.

Also, make sure that you have adequate funds to support the mortgage payments for at least 2-3 months, just in case you aren’t able to find a tenant quickly.

Looking to convert empty homes?

Check out Empty Homes.com
EmptyHomes.com is a registered Charity with a mission to bring empty properties back into use. They only cover properties in England.

This site has lots of great information for UK investors.

Article: BTL Trends in the British Isles

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2. Buying UK investment property off plan or direct from a builder

This is a personal favourite of ours and a great way of building a UK investment property portfolio.

Just like any other business, builders are often keen to off-load their housing stocks. This occurs at 3 times: at the beginning of the site build, at the end of their financial year, or at the end of a development.

The least risky of these 3 options is often the latter, for these reasons:

• You can see what the estate looks like once it's completed.
• You can see how many other properties are already rented, or being offered for rent, on the same estate.
• You can determine the true rentable value and take-up of the rental properties on the estate.
• You can often get the same price as the early investors (sometimes with carpets/lawns included etc). This takes some negotiation, and you will probably need to engage directly with the Sales Director of the building company.

For best results do your homework before contacting a building company.

Before you begin negotiations, we recommend you understand:

• which other estates the company is building, and when they will be complete,
• when their financial year ends, and
• what the rental market is like for all estates that interest you.

Then you need to negotiate hard! Go into the discussion expecting to get at least 7-10% off the price. We have, in some cases, achieved much more than that.

A lower price is almost always achievable, and you won’t have to find such a large deposit upfront to get your buy-to-let mortgage, provided that the rental value you expect to achieve will meet the requirements set down by your selected lender.

Note:

Some mortgage companies will only take a 5% builders deposit into account. However, there are lenders who will also recognise additional cash-back incentives, or at least a portion of them.

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3. Buying UK investment property from an auction

This is probably the riskiest way of purchasing a property - unless you really do your homework. But it can be an excellent way to develop your UK investment property portfolio because the process is quick and relatively painless.

These are some best practice strategies for buying at auction:

• Always read the legal pack for any prospective house. It’s freely available from the auctioneers and contains valuable information.
• Short-list and visit any suitable properties to assess them for condition, repair costs, general location, sale/rentability etc.
• Always set your budget, and know how to finance your purchase, before you visit the auction.
• Ideally have an Agreement in Principle from a mortgage lender for a set amount of money - before you offer a bid.
• Engage with a competent solicitor before the auction (your mortgage advisor can usually tell you which are the best to use for 28 day transactions).
• Have the means to pay the required 10% deposit (and any auctioneer costs) before visiting the auction.
• Don’t get carried away with the bidding. Keep telling yourself that you are there to make money!
• If you are out-bid, go for another UK investment property on your short list.

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4. Buying UK investment property from an estate agent

This is generally the hardest way to make a profit. That said, it is achievable. You really need to befriend one or two agents and try to get first refusal on properties meeting your requirements.

The best types of agent-sold property to turn into profit are:

• probate properties,
• partially refurbished (where the individual has started the job but run out of money), and
• repossessions.

However, any property can turn a profit if you buy it at the right price and it’s situated in the right location for your target market.

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5. Finding a UK investment property by placing small ads in the local papers

This is a method often used by larger, cash-rich investors such as Pillar Properties. They use small-ads and websites to market their ability to purchase from private homeowners who either need to move fast and find they are stuck, or who have fallen on hard times.

You offer to buy the property below its market price, and the seller is guaranteed a sale.  This could result in you making a significant return on your investment.

The key here is in knowing your local market, and keeping the price as low as possible. (Business as usual, then!)

This could be a fairly easy way to build a profitable UK investment property portfolio.