I Have Never Invested in Property Before...
Why invest in property?
How did Buy-to-Let start?
What is conveyancing?
How much does the conveyancing cost?
Is it important to use a solicitor / conveyancer that is located close to the property?
Is there any advantage in using one solicitor for all my properties?
How do I find a surveyor?
What is the difference between a mortgage survey and a full structural survey?
Do I have to use the surveyor my mortgage company suggests?
Will my insurance company require that my house is surveyed?
Who can apply for a mortgage?
Is there a different interest rate for buy-to-let customers?
How do I decide whether to take a fixed or floating interest rate type mortgage?
Should I use the same mortgage company for all my properties?
Should I use a letting agent?
Can I change letting agent midway through an AST (tenancy agreement)?
How much do letting agents typically charge?
Who should hold the tenant’s deposit?
How long does completion take once I have made an offer and it is accepted?
Who should I chase if the process is moving slowly?
What is a chain?
At what point do I need to contact the mortgage company?
When will the mortgage company start charging me interest?
Why invest in property?
There are a number of decisions to be made when when making an investment, regardless of the asset class. There are generally two returns from an investment: capital growth and income (referred to as dividends on equities, rent in the context of property). Investing in property has the same potential rewards - a steady income stream if the houses are let well, and the potential for its value to rise. The attraction of property lies in the active manageability of your portfolio. Whereas when investing in shares you view the companies through their balance sheets and financial reporting, with your own property investments you can view their growth and expansion possibilities at first hand.
Secondly, assets of different classes move in different cycles. The main UK equity index, the FTSE100, is at the time of writing (Autumn 2004) roughly where it was in 1997, and showing little signs of an upside in the foreseeable future. Property on the other hand has been “booming” for some years. Whether we are at the summit of a peak in prices or not, what is clear from recent history is that maintaining a diversified portfolio of investments, which definitely includes property, is beneficial in the long-term.
Lastly, changes in house prices have mixed effects on a landlord. Lower house prices do not necessarily spell doom and gloom - they often signify a buying opportunity. The majority of landlords do not buy property with the anticipation that they will hold onto it for only 1, 2, 3 or even 4 years, typically they invest for the long-term (5-10 years). Landlords generally subscribe to the theory that property over time increases in value (particularly if you hold onto it over the long-term) and so on a day-to-day basis it is the property that is the most important factor. Given that lower prices lead to higher yields and that prices will, along with rental growth, drift higher over time, many investors will not be worried should prices fall in the short-term. In fact, many would regard such a step as a good opportunity to buy.
That said, there are some investors with short-term investment horizons (often known as developers). Typically, these investors will look to find mis-priced assets, these are assets which appear undervalued by the market. Perhaps this is a house that is worth £80k but is need of renovation. If the renovation will only cost £25k but upon completion the property will be worth £130k an investor will have made a significant profit (£25k)in maybe only 2 months. But there are increased risks associated with development.
How did Buy-To-Let start?
It’s actually been around for many years, but legally buy-to-let has only been classified as an investment more recently. It was, the Housing Act of 1988 and 1996 allowed letting to be considered as an investment.
One of the schemes for investment in property is the Buy to Let scheme. It is a joint incentive of ARLA (Association of Letting Agents) and the mortgage lenders. The main idea is to help private landlords to invest in property they intend to let without paying commercial rates of interest as in the past. The view of many professionals is that Buy to Let makes the private rented sector to develop and grow which is good for the other advancement economies.
The legal process undertaken when purchasing a property is known as conveyancing and is conducted by either a solicitor or coveyancor. The principle work of the solicitor / conveyancor is checking the title deeds of a property, conducting local authority searches (to find if there are any environmental issues or hazards affecting the property) and coordinating to make sure the exchange of ownership (including payments) is carried out smoothly.
Ideally you would contact your solicitor / conveyancer before making an offer, or at least have one in mind.
There is usually a fixed fee for such a service, often in the order of £300, plus ca. £175 for the Local Authority Searches and Land Registry.
No. It is unlikely to make a difference when buying property within the UK and as a general rule using a solicitor that is located close to you or indeed a solicitor that you trust is the most important factor.
Yes. It is often helpful, as the solicitor knows about your affairs and most importantly about the way you work. However, it is not vital and so it is important to make sure that a solicitors fees remain competitive so as to ensure that you are not over paying.
Often when purchasing a property using a mortgage, the lender will have a list of preferred surveyors all of which should be members of RICS (Royal Institute of Chartered Surveyors). However, the mortgage company may have only requested a mortgage survey which is far less comprehensive than a full structural survey.
If you feel a full structural survey is required you should discuss this with the mortgage company at the outset.
If you are buying the property in cash you can always find surveyors buy looking on yell.co.uk , but always remember make sure that they are members of RICS.
In order to safeguard their liability, mortgage companies will insist on a survey being carried out, however this will not be a fully comprehensive survey as these are more expensive. More in-depth surveys are called full structural surveys and are undertaken at the buyer’s discretion. These surveys test the integrity of the building and the surveyor will comment on the area and remark as to the value of the property.
You don’t have a choice for the mortgage survey. The mortgage company will instruct a surveyor on your behalf. For the in-depth survey, you can choose who you like; though obviously it is cheaper if you simply pay the surveyor that is carrying out the mortgage survey an additional amount to conduct the structural survey.
No.
Typically you are required to be a UK resident with a good credit history.
Yes, typically buy-to-let rates are 0.50%-1.0% higher than normal rates.
There is no right answer.
It depends on your expectations for interest rates in the future, coupled with the fixed/ floating rates currently being offered in the market. The ideal tactic is to take up a fixed rate when future interest rate expectations are at their absolute floor- although this is in practice extremely hard to achieve.
The main advantage of fixed rates is the certainty you have over your outoings for financing your debt, probably one of your major expenses. If the floating rates are considerably cheaper though, and remain cheaper throughout the lock-in period, you would have saved money just allowing the interest to float. Hence there's no right answer. Work out what different scenarios would mean to your cash flow i.e. if interest rates go up/ down/ remain the same, and take into consideration the cost of exiting one of the agreements if the economy changes and it is no longer competitive to remain in the same deal.
Not necessarily. Convenience is the main factor, for example if you have a number of properties and wish to use equity from one to finance another, having one company handle all your properties is probably easiest. However, obtaining competitive rates is the key to succesful financing not convenience.
Do you live locally? Are you willing to be contacted at any time? Are you happy to chase people? The actual sourcing of tenants and managing their contracts/ deposits/ needs/ complaints is another whole side to being a landlord. Many people handle all these issues themselves and get a great deal of satisfaction through managing their investments well and saving on the extra fees. Others would rather not be burdened with the potentially time consuming task of handling tenants. It has to come down to personal choice in the end!
You can, but you may be liable to the letting agent’s fees for the entirety of the tenure of the tenant. Check with your solicitor if you’re not sure.
Around 10% on average.
This is normally held in “stakeholder” form, whereby the letting agent will look after the deposit for the duration of the AST, and deductions can only be made by mutual consent of the tenant and the landlord.
A minimum of 3-4 weeks, but it can often take longer.
It is not always possible to speed up the process, often as the hindrance is down to the vendor or their solicitors. Contacting your own solicitors may be a useful step.
Chains occur more often in the owner-occupier market than with tenanted/ landlord type investments. If someone is looking to move house they will need to simultaneously sell their own property and purchase a new one, and with the delays that can occur (between solicitors for example) this is hard to achieve. Hence a “chain” of people can build up whereby a string of houses are held in limbo while the first person completes the sale of their house, and so on. The landlord market is largely inhabited by “cash buyer's” whereby this is not an issue.
What is conveyancing?
How much does the conveyancing cost?
Is it important to use a solicitor / conveyancer that is located close to the property?
Is there any advantage in using one solicitor for all my properties?
How do I find a surveyor?
What is the difference between a mortgage survey and a full structural survey?
Do I have to use the surveyor my mortgage company suggests?
Will my insurance company require that my house is surveyed?
Who can apply for a mortgage?
Is there a different interest rate for buy-to-let customers?
How do I decide whether to take a fixed or floating interest rate type mortgage?
Should I use the same mortgage company for all my properties?
Should I use a letting agent?
Can I change letting agents midway through an AST (tennancy agreement)?
How much do letting agents typically charge?
Who should hold the tenant’s deposit?
How long does completion take once I have made an offer and it is accepted?
Who should I chase if the process is moving slowly?
What is a chain?
