A question asked by many new to property investing is simply how do I invest, how much do I need and how can I get started? Buying property can be less complicated than you think, but remember it comes at a cost. Here’s our ten steps to purchasing your first property investment.
Step One is to ensure you have enough money to begin with. Buying a property for £100,000 for example you will most likely need a minimum deposit of 10% to secure a mortgage which is £10,000 to initially pay out. Then there’s agency fees, legal fees, survey fees and the costs for repairs and works upon the purchase so having enough cash spare after everything is paid out is also essential.
If you don’t have the cash then you might get the credit? Starting a property business through a limited company is an option often used whilst some would borrow against their own home or even invest in joint ventures with friends and family to collectively fund their potential project.
Step Two is to find the right property for you. Whether you go through the traditional methods of Estate Agents or online portals like Zoopla and Rightmove or if you prefer to use a dedicated property sourcing agency that helps you with solicitors and letting agents going forward or if you feel competent to get out there and find your own stock simply by walking the streets, the key secret is finding the right property for yourself, something that you feel 100% comfortable buying and something that you can afford with all the above (in step one) considered.
Step Three once you have the property that you want in mind it is time to make that offer. Whether you attempt to knock down the asking price with a haggle or if you are happy to pay the required amount it’s always worth getting a second opinion and checking local comparables in the area you are investing in (You can do this by putting your postcode in to Rightmove and Zoopla and working out the difference in values of similar size and spec properties). Once you fee you’re happy with the price you are going to offer for your property it’s time to table that bid and make the offer. A waiting game it may be, it could turn into a chess match and you might have to play around with figures to compromise but once that offer is made it is then up to the seller to say yes and once they do the property is all but legally yours. But there is still a lot more to do.
*Please note using some agencies you may be asked to pay a deposit which is often non-refundable should you not secure the appropriate finance to continue with your purchase.
Step Four is time to secure a mortgage on the agreed amount for the property. Some investment property sourcing agencies (like Prime Property Agents) offer property finding packages that also assist with mortgage brokers which help do a lot of the work for you. If you decide to go down the route of finding your own mortgage then mortgage comparison websites are great to get the best deals. Once you apply for a mortgage in principle that will be either declined or accepted. If the latter great news. You are on your way to securing your property.
Step Five is to hire a solicitor or conveyancer. Again if you purchase an investment property through a dedicated finder they may be able to help with this but if not you will need to find one yourself to help with the legal work to transfer the ownership of the property to you. Often your mortgage provider can help with this as they are more likely to work with someone on their own panel. Solicitors can be slow and laborious and they do cost a lot of money but to get things legally done you must take this necessity for them to do the appropriate property searches. It is recommended that the solicitors also do the conveyancing although this can be done yourself, sometimes mortgage companies will not allow DIY conveyancing and if they do it can be a very complicated process for a novice. Usual solicitors fees would cost anything between £400 – £1,000 per property.
Step six is often recommended by the mortgage company as it refers to them being confident enough to lend the money against the property. Survey costs from around £300 upwards and gives you an intrinsic value of the property allowing the mortgage company to lend you the money to proceed.
Step seven is time to hand over the money. If all goes to plan with the acceptance of all the above you will be asked to pay your agreed deposit in full (ie 10% of the sale price) and this should be paid directly to your conveyancer or solicitor.
Step eight once you have paid deposits over and once you have received your survey report it is time to exchange contracts with the seller which means you are then legally the owner of your new property. DO NOT PULL OUT at this stage as you will lose your 10% deposit.
*Please note before you exchange contracts you will need to agree a completion date with the seller and you can only exchange contracts after the solicitor/conveyancer is satisfied with the searches, a formal mortgage offer has been received and arrangements have been made for your 10% deposit.
Step nine is to complete the sale and take possession of your new home. Your agent will often supply you with keys (unless you purchase direct through vendor) and you will need to make arrangements with gas, electric, water, telephone, TV and internet companies to ensure that you are not billed on anything prior to your completion date. Once you have your property it will be all up to you on what you do next.
Step ten is the final step in how to invest in property. Now you have your asset it is time to ensure you start profiting from it. The most popular form of investment property returns is through renting it out. Again if you purchase through a dedicated investment property finding agent you will find that they can often help with finding you a tenant and/or supplying you with a letting agent that covers everything so you don’t have to. Letting Agents often charge around 10% of the monthly rent to look after any problems that tenants might have allowing you to get on with your day to day life without the hassle of being a landlord.
If you prefer to look after the property yourself full time, then advertising for tenants can be done in the local newspapers and on local websites like gumtree. It is always advisable that you use a managing agent though who can look after the whole process so that you don’t have to.
Once your rent is coming in and you start to see positive returns… It’s time to invest again…