Advice to help rookie property investors get it right first time
You’ve found your ideal investment property. Now what? You arrange a mortgage, pay a deposit, sit back and wait for the purchase to complete. If only it were this easy. When you invest in property, there is a complex process to follow.
You will need to communicate with many different people, complete paperwork, meet deadlines, and ensure your mortgage financing is in place. Especially if you invest in off-plan property. Even if all this runs smoothly, you must then ensure that your property is prepared to be let, obtain tenants, and then manage your property. We call this process ‘progression’.
In this article, we examine the mistakes that even experienced investors are prone to make in progression.
1. You work with the wrong mortgage broker
Your mortgage could make or break your investment. Get the right mortgage from the right lender, and you could make tens of thousands of pounds’ more profit over the lifetime of your investment. 1% saved on mortgage interest on £150,000 over a 25-year term will save you £37,500 in mortgage interests payments.
Using a specialist mortgage broker with specific knowledge of the buy-to-let market is critical. A broker with the necessary qualifications, experience and market access will ensure you receive value for money – and help to maximise your investment profits.
2. You hire the wrong solicitor
The solicitor’s job is much more complex when dealing with investment property. It doesn’t begin and end with conveyancing. There are many considerations to make. These include taxes, complexity of purchase, and your investment goals (e.g. capital gains, inheritance taxes, etc).
You need experience on your side – specific experience in dealing with investment property. The solicitor who did the conveyancing on your home is unlikely to have that experience.
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3. You screw up the paperwork
When investing in property, you can become buried under a mountain of paperwork. Identification. Anti-money laundering. Mortgage applications. Contracts. Legal documents. The list can seem endless.
If you miss a signature or fail to answer a question correctly, or send some paperwork late, you may not be able to recover. Dotting the Is and crossing the Ts on paperwork is part of the responsibilities of your mortgage broker and solicitor.
4. The complexity of the deal crashes your concentration
With many people and procedures involved, it is easy to become overwhelmed. You lose focus on where you are in the progression process and what needs to be done next. It’s a web of interlinked items and elements. It can be mind-boggling.
It is even worse if you have a full-time job. You have all this other stuff happening in your life, and at the same time, you need to focus on the progression of your investment. If you drop the ball, you may never retrieve it.
5. You miss deadlines
You lose focus. You send the wrong paperwork. You miss an important question. You forget to sign a form or sign it in the wrong place. There are a multitude of mistakes that might mean you miss crucial deadlines. Deadlines that cannot be recovered. Perhaps you are dealing with a lenient third party, who will give you an extra day to return your paperwork. Don’t bank on it.
6. Your mortgage application is refused
There are many reasons your mortgage application could be refused. Most of them are avoidable. We’ve mentioned some above: poor paperwork, missed deadlines, a lack of focus on your part. Perhaps you mistakenly applied for a residential mortgage.
There are other events that are unavoidable. Perhaps you lose your job. Or, perhaps the mortgage provider changes its rules. The mortgage you thought was yours now isn’t. Another reason a buy-to-let mortgage broker is indispensable.
7. Your property is full of snags
If you are investing in new build property, there are usually issues to be addressed when an off-plan property is completed. Snagging – the process of inspecting a property for issues – is essential. A professional snagger or building inspector should accompany you when you snag a property. They will uncover every underdelivered detail.
The snagging inspection must be done before you sign off on completion. You cannot turn the clock back and have things put right that you didn’t report. Get this wrong, and the wrinkles that need ironing out will come out of your pocket.
8. You can’t let the property
This is technically outside the scope of progression, but you should consider the possibility of finding it difficult to let the property, nonetheless. Always make sure that you research the rental market. Charge the right rent. Let the property with the amenities your target tenants want (such as Wi-Fi for young professionals). Be prepared to be flexible on price. Accepting an offer of £25 or £50 a month less than your asking price could avoid a costly void period.
9. Property management becomes a full-time job
Did you invest to become a full-time landlord? More than half of the UK’s buy-to-let landlords employ professional property managers to take care of all the daily tasks and responsibilities of being a landlord.
If you are experienced at marketing properties for let, vetting tenants, chasing rent, and dealing with repair and maintenance requests, then managing your own property may be a time-consuming challenge you rise to. Otherwise, employ an investment property manager before you complete your purchase.
There are many hurdles to jump when you invest in property. Each one could trip you up and stop you from reaching the finish line. Progression is the way to ensure that you clear these hurdles. In our next article, we examine the progression process, the parties involved in it, and the steps involved.
In the meantime, to learn about current property investment opportunities, contact Gladfish today.
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