Sally Lawson UK Lettings Business Professional

How to identify a True BMV (Below Market Value) property and not get left with a sows ear!

Written by Karen-Mills on February 17, 2012 – 5:17 pm -

With property prices at a low and rents on the increase there has never been a better time to invest in a buy to let property! But be careful what you buy…..

A property is only a good deal if it rent’s well, if it is left empty (void) because it’s not in the right location or a desirable area then a landlord can very soon find himself having to stump up all of the bills whilst it stands empty, council tax, standing charges, plus the mortgage repayments and can quickly find himself falling out of love with his rental unit.

There are many agents out in the market place at the moment selling some great BMV deals, however before looking at any deals from a saucing company you should always ensure that you do your own due diligence and market research.

Check firstly the valuation of the property, do a land-registry search and look at comparables on right move and find out what price, others in that same street or road have been purchased at. There have been some instances where a valuation has been hyped to an unrealistic valuation, to be falsely discounted.  Therefore you are actually paying true market value with very little discount.

Speak to a competent letting agent, NOT an estate agent.  Give them as much information as you can, ask them will this property rent? Is the location good? What time of tenants will it attract? What is the demand in the area?

Any lettings agent worth his salt will take the time to give you advice; he will want your business. Most of all check that the rent stated on the deal matches what the local agent say, as these people know their territory and should be giving you accurate information.

Don’t pay for a deal upfront or in advance, only pay on completion.  If it’s genuine deal then no money should part hands until legal exchange of contracts has taken place.

Once you feel you have the right property run a classified advert on a classified online directory to see what the response is like and whether there is a demand for such a property

Consider the type of market you are buying the property for and how it will be managed. HMO (houses in multiple occupation) and LHA (Local Housing Allowance) tenancies are traditionally harder work and not dealt with by many letting agents, so consider how you will manage these property types. Do you have experience in handling these yourself, is there a good quality reputable agent nearby that can handle it for you, have you checked them out as agents?

I have seen many landlords buy properties hundreds of miles away from their home on the promise of great cash flow, only to be left driving up and down motorways constantly, spending their profits on petrol, or suffering at the hands of poor managing agents.

Do take the time to inspect the property yourself, even if it’s a distance away, drive around the location at different times of the day if possible, and at weekends to.  Ask yourself the question; … would I live here? Look at the condition of the surrounding properties, are they well maintained loved and cared for?

Is the property in as good condition as it looks? Some vendors will paint a property every week to hide damp whilst it is on the market, put furniture in front of offending walls with cracks in, leave the garden overgrown so you can get outside to see the rotten windows, look around the property, inside and out and pay to have a good standard of survey done to identify any issues now as, to not do so could cost you all of your profit and much more.

In some areas across the country, if you intend to buy a property and convert it into a HMO, you will need planning to do so. Article 4 has been set up in many council’s to reduce the “studentification” problem, they feel they have. This has resulted in the need to obtain planning consent to accommodate 3 or more non-related people in a house, very difficult, with some council’s making it virtually impossible. Before considering this type of investment, you need to really be sure that you are aware of the local planning laws in your area.

In the future, the energy rating of a property will become of paramount importance, and if too low will prevent this property being let at all. This will seriously affect the resale value also. So consider that if you want to buy that big old, wrangling former hotel, how much it will cost to insulate the walls, roof space, replace the windows, upgrade the heating and ventilation system and any damp problems that follow. The investment does not look so attractive now after all! From 2018 any properties that are F or G rated, will not be allowed to be rented.

According to the English housing survey 2011 there were 3.8 million households in the social rented sector, and 3.6 million in the private rented sector.  The gap of 200,000 has been closing every year since 1980 when the difference between the two stood at 3 million.

275,000 tenants registered for private rental accommodation in 2011 an increase of 24% on 2010!!!  The demand is such that rents are predicted to rise, so there are some great opportunities out there and with the ever increasing shortage of new properties being built the demand is hotting up for quality accommodation.

But always remember it’s not a bargain if it doesn’t rent!

In Summary, here are my top key points to consider whether a property is a BMV or not…

• Check the area by visiting the property, is it a decent area or is it so bad that even the council cant rent properties in this area, there might be a reason why it is so cheap
• Compare rental prices on the internet portals to check what the “average” rental asked for on the type of property you are looking at (never take the top price asked for, always go for the average.
• Check out the recent prices that similar properties have sold for, on Rightmove, land registry and other similar portals
• Check the tenant demand by placing an advert on classified advertising sites to measure the need and response
• Decide the type of tenant you will let that type of property to and your experience in handling that type of tenant.
• Ensure that there is a good quality letting agent in the area, that can handle the property management for you and check them out to make sure they are as good as they say they are.
• Confirm your findings by talking to the Letting agents in the local area-do not ask the selling estate agent, they have a vested interest in you buying that property.
• Have a survey on the property. Many times have landlords ended up spending all their profits on making good, dodgy DIY or hidden defects, so check it out beforehand
• Check out the Local requirements for planning as they may seriously affect your purchase
• Energy Rating efficiency check and consider the future rules with regards to energy efficiency.

Karen Mills has worked in the property industry for the last 20 years, selling in total over xxxx pounds worth of property in her time. Starting as a receptionist, she worked her way up through the Estate agency ranks, to negotiator, senior negotiator, branch manager and eventually area Branch Manager for one of the country’s leading national chains of Estate agency.

Karen joined Sally Lawson as a co director of Concentric Lettings to head up the Property Acquisitions team in 2007 and hasn’t looked back since. Working with Investors (from the other side of the fence) Karen has been able to put all those years of being an estate agent to source great deals for her clients and with the experience of working with Sally Lawson and the team, to put great substantial investment portfolios together to stand the test of time.

 Her testimonials from clients speak for themselves. Here Karen gives us the benefit of her knowledge and years of experience in what to look for and why do people “Invest in the Residential Lettings Market”.

Karen Mills

Property Acquisition Specialist

Tags: below market value property, buy to let, buying property to rent, concentric lettings, estate agents, hmo, how to assess, investing in rental property, karen mills sally lawson, letting agents, lha, property acquisitions, property investment, property sourcing, repossessions, value of property
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