Property Due Diligence – Get your ducks in a row

How many property investors do you think are wishing they had done more due diligence before they went ahead and committed to a purchase?

This post is to give you a heads up of where to begin, simply because I meet so many wannabe property investors and new landlords who just don’t know where to start. They often get approached by property sourcers as a result of visiting internet forums, attending a property networking meeting, subscribing to magazines or simply searching the internet. Before they know it their email inboxes get bombarded with offers of property deals advertising massive discounts and fantastic returns. As the seasoned professionals reading this will know, very few of these deals are as good as they might first appear.

My first piece of advice is never to completely trust a person who makes commission or charges fees for introducing property deals to you. Get everything they tell you checked out independently. If you know all the right questions to ask and where to get the answers for free than it’s just a matter of having the time to do it. However, if you are unsure or your time is valuable a great starting point is to invest £29.99 with Experian on a PropertyCheck. They provide 17 page reports for just £29.99 which is a small price to pay prior to investing any more of your valuable time and hard earned money. These reports provide a detailed valuation together with wide information including but not limited to energy usage, carbon emissions, schools, transport, crime, employment, flood areas, local services and a demographic profile of people living in the area such as age range, marital status, income, financial stress, family size, percentage of homeowners etc. As well as being an incredibly useful element of your due diligence process for making purchasing decisions these reports can also provide excellent independent backup to your own marketing information to pass on to prospective tenants.

If what you read in that report doesn’t put you off then you may want to see what mortgage deals are available without arranging to meet with your mortgage broker at this stage. You can also do this here by using our buy to let mortgage calculator. This will tell you who the top lenders are in the market and how they are pricing their mortgage products. The Buy to Let mortgage quote system is regularly updated and enables you to compare a wide variety of Buy to Let mortgages and see how these affect your returns.

Get Quotation

If it looks like you can arrange the financing you need on terms which are acceptable then you really ought to consider all of the costs and returns. Don’t let time or lack of an accountancy qualification prevent you from crunching all the numbers, try our ‘Viability Calculator’. This tool is extremely quick and easy to use.

Analyse

All of the above need not take you more than an hour and will cost you less than £30, a miniscule investment to make when compared to the massive commitment of purchase and ownership.

There is no substitute for taking a good look at the property and the area yourself though. If you are unsure of anything take a second look and take a good builder or surveyor with you.

If you decide to progress you will now want to instruct your solicitor and possibly a mortgage broker if you are not buying for cash. The mortgage lender will want to get an independent valuation done for their purposes and you will need to pay your solicitor to do searches. These professionals will provide advice to guide you from this point to completion of the purchase. Always use your own mortgage broker and solicitor. If you are told that you can’t then it’s probably time to walk away and move on to another deal. If you need help to find a good surveyor, builder, solicitor or mortgage broker please see our Property Services Directory. I suggest you send a private message to six of them in your area and ask them to provide details of their services, experience and charges. You can also use the directory to find letting agents and many of the other trades and professions associated with property ownership.

That’s not the end of the process, buying the property is the beginning of your journey to becoming a landlord. The above usually takes a few months but ownership could go on for decades. All of the tools mentioned in this article and more can be found in the Due Diligence section of this website. I also recommend you to contact the businesses advertised in the right hand side of that page.  I’ve written a lot more about my own property investment strategy and experiences which you may also find useful, please see below.

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