Getting the right buy-to-let valuations
A lot of you may not be aware that a great number of property investment companies have gone belly up during 2008 and 2009. The biggest of these have been Inside Track and Challenor Properties. Regardless there are probably 50 or so that no longer exist and to be fair I think it's safe to say that many others that still exist have either moved out of the UK property market or moved out of new build property.
Anyway, we have a steady supply of people who began working with other property investment companies and that are now calling my team wanting help. In pretty much all cases the property, they bought was bought well and truly overpriced.
After seeing literally hundreds of these overpriced transactions the one common factor throughout is the fact that the original valuation was overpriced. In some cases by up to 30%.
After checking the values, it's clear that the valuation was overpriced right from the beginning.
This presents two very serious challenges, and both are normally not realised until a couple of years down the track.
The first is that when you come to remortgage or sell the property you may not have seen any growth so my whole 2 Year Cash Flow Rule goes out the door and normally you'll need to hold for another 2 years before being able to do anything with the properties. This should be a huge motivation for avoiding these type of transactions.
Secondly, you will normally have forgotten about the price you paid, the cash back you received and you'll normally have spent any provision you may have allowed for. I call this one ‘Short Memory Syndrome'. Whatever the deal is you will forget it soon after completion so that when two years comes around and you wonder why the property is such a dog.
One of the foundational principles that I have built Gladfish on is that the valuation is the valuation, and you don't stuff around with it. So whatever the property is worth in terms of true market value that's the value you work with. It doesn't matter if you can get a valuer who will give you an extra 10%. Some property investment companies do multiple valuations in order to find the highest valuation or to find the valuer that they want to use. You may get more money from it through the deal structure, but you will pay for your decision in two years time, especially if you have a two-year mortgage deal.
Make no mistake, most of the people who come to us having worked with other property investment companies all suffer from this one simple mistake.
The solution is relatively easy to avoid before but much harder after you buy. Do your own due diligence, second guess everything and most of all work with people with a proven track record of success.
If you do have property bought through other property investment companies and you want to know what your options are now that the market has bottomed then give the team a call on +44 (0)207 923 6100, and they'll be happy to talk through your options.
Live with passion,
Brett Alegre-Wood
