Suitability

You must consider your own personal financial situation and understand what your own personal investment goals are and as such consider your cash flow position at all times. Please look at personal goals and budgeting.

Location

You must consider the location of the property. It is important to establish if the property is in a location that will match with your goals and budgeting plan, this will be personal to you. You may decide that you are looking for an additional income strategy whereby cash flow is the key focus for your investment. Some investors are looking for income as opposed to equity; therefore the yielded return is more important. Purchasing properties in low value areas whereby the demand for rental is moderate, may provide them with a higher return on investment, however such strategy may have higher risks.

Transport Links

How accessible is the property to transport and motor way links, are there any proposals that will help values and desirability of the area, such as a new rail network, airport expansion and or motorway. Certain areas have become excellent commuter towns and as such increased values as demand has risen for properties, a typical example is of Watford, being close to London, many people who work in the city opt to live out due to higher property prices in central London. As such prices in Watford have risen significantly due to a high level of demand from the over spill.

Employment

It is a good strategy to establish who the main employers are in the area and also in the surrounding areas. For example purchasing a property in a market town whereby the Local shipping industry is the key contingent employer, could have devastating effects if they were to go out of business. The impact of which would mean that the demand for housing would reduce as people may want to relocate for alternative employment. This would therefore make a property difficult to rent and cause the property values in the area to decline.

Education

A school with high academic achievement and good ofsted standing can help improve the desirability of an area, as the property may be in the boundary for parents to send their children, which may make the rental and the capital values in the area rise due to such demand. Colleges and universities also may attract a lot of interest for rental, and as such student houses / accommodation can represent higher levels of rent. However, you must factor in potential void periods, as a student let property may only be vacant for part of the year the student is away.

Development

A new shopping Centre or an extension, a new university, super markets, technology centers, business parks, restaurants, recreational centers, museums, tourist attractions, all could help create employment and attract interest. New housing schemes could develop old disused sites, all of which may enhance the value of the area.

Regeneration

This can have a positive impact, where by local housing authorities and councils can be refurbishing their property stock, putting derelict homes back is use and building out in areas creating communities, all of which may help increase the desirability of the area, which inevitably will help improve on the capital value of the property.

Points of Interest

Tourist Locations may be great to attract people who want to live nearby for employment, however in off peak seasons the demand can drastically fall, causing reduction in rents and voids. However, there can be other types of attractions that may attract visitors all year round and as such provide excellent rental demand.

Crime Statistics

These are important to consider, as the property may be in an area that has a high crime rate, as such this could affect your investment, due to increase in insurance premiums, a potential break in and damage and may represent low demand for rental or sale, which will increase the risk of your property investment.

Price Comparable

Research sold prices of similar properties in the area, making sure the value you are paying reflects that of the market. Consider sold prices in particular that have sold recently in the last 12 months. Look at Land Registry information, such as house pricing data, and see how the prices of the area have fared. Also look at other properties on the market, how much they are on the market for, how long they have been on the market, their location and condition comparative to the property you are considering.

Tenure

Establish whether the property is freehold or Leasehold, together with any easements of restrictive covenants. Also consider the duration of the Lease and the impact it may have for future salability. Be careful of clauses such as landlord insurance, default notice charges, planning permission and building approvals.

For example you may want to sell your property 10 years from now, the remaining term on the lease may be 40 years, and as such when you come to selling the property then the term remaining will be 30 years, this will affect the value of the property and potentially may cause an issue at such time regards to it being mortgaged. However, there could be an extension clause whereby the lease could be renewed for a small premium.

You may decide that you want to extend the property, and apply to the Landlord for their consent, and as such they could request a premium from you or not grant you the necessary authority to extend.

Occupation

If the property is occupied, examine its current agreement, run this through with your solicitor. Have a look at the term of the agreement remaining, is there an agent instructed and if so what are their management costs, are there any rent in arrears, was a deposit paid and where is this held. See if there is also an insurance policy or bond in place for the tenant or are there any disputes or notices served either way. Also try to get a copy of the inventory and may be speak with the rental agent should there be one instructed.

Legal

Ensuring that the title is free from encumbrances and that there are no restrictions on the title of the property that could cause problems for your intended use at a later date [see examples] drop down menu. Local searches are strongly advised to ensure that there are NO adverse entries, such as a Land Charge from the environmental department, a Compulsory purchase order, building regulations and planning, to make sure the property has been made and built according to planning and building law and that there is NO liability order or pending action. The duration and terms of the lease should the property be of Leasehold tenure. Your Solicitors will provide you with a report on title, and address all these issues for you, helping you mitigate your risk.

Warranties and Indemnities

Check to see if there are any warranties or indemnities in place for any works that have been done, this could include an architect’s certificate, NHBC policy, Gas safety certificate, electrical installation certificate, Fensa certificate, damp course, cavity wall ties, roofing works and drainage works.

Fixtures and Fittings
Obtain a copy of the fixtures and fitting protocol forms, this will help establish what will remain in the property and will be excluded from the sale.

EPC

The Energy Performance Certificate is a great indicator of the running costs of the property for heating and energy bills.

Survey

If you are obtaining a mortgage then your Lender will arrange for a valuation to take place by a qualified surveyor [Royal Institute Chartered Surveyors], this will enable you to establish the condition of the property, together with the rental value. If the surveyor identifies and defects in the property, then they may request other reports such as, timber and damp surveys, structural surveys, electrical inspection, and or gas inspection. If you are NOT obtaining funding, then it will still be highly recommended to obtain a valuation from a surveyor, local to the property, so that they can provide you with a similar report.

Rental Market

Look at the rental market and demand, what is the availability of similar properties to let. Factor in the location and condition of those properties compared to the one you are interested in. Consider if the demand is likely to rise or fall and if so what the reasons are for this. Speaking to other rental agents locally will help you assess this. Also look at the local housing allowance rates, and see if there are any ways of increasing the income.

For example, a 3 bedroom terrace property may only attract £450 rent in an area; however, if there were 3 individual room tenancies then the same property may be able to achieve £975. You may therefore have to then consider is there demand for this type of accommodation and residency, the potential void periods, and risks.

Enhancement Value

You may decide to consider the possibility of extending the property or refurbishing the property. You will need to consider the time and cost it will take together with any void periods in doing so. You should account for the effect this may have on your cashflow. After such works have been concluded you must consider what the benefit of such works will be, for example will it help raise the rental value or demand and the increase in capital value versus the cost.

For example

A £20,000 extension may add value to the property by £30,000, however the rent for the same property may remain the same. You may decide to keep the property for a period of 10 years as part of you strategy, and as such, carrying out the extension sooner will mean that you have lost the benefit of the £20,000 for that period. Allowing that amount to be invested, and then carrying out the refurbishment when your closer to sell the property [10 years] will mean that the property will be in a better condition and as such be more appealable in the sale market.

Running Costs

Insurance, property management costs, repair costs, service charge costs, ground rent costs, council tax void periods.

Local Demand

The property could be in a town or city whereby there is a good level of local demand from people wanting to rent or buy. Such demand will normally provide a positive resale market.

New Build

Inspect the developers, Company Registration and Owners Review, Land Title documents, that they have Construction Licenses, check the Developers background, inspect the sales agreements and contracts, and run this through with your solicitor. If they are a company, then you may decide to do company house searches and or company credit report checks to assess their creditworthiness and establish if they are in a solvent position.

Regulation

Make sure that the agent is regulated by a governing body such as Royal Institute of Chartered Surveyors, Arla, National Association of Estate Agents, The Property Ombudsman Scheme and that they carry professional indemnity insurance, making sure that you have some form of protection.

Visit

Always inspect the property, and drive around the area, making sure that you are satisfied with your intend investment.