When you reach the purchasing stage, there are many things you need to consider, such as finding the right property to ensure the best returns and deciding on a reliable solicitor who will be supportive all the way. A good broker can help guide you in decision-making, as well as research and direct you to the right mortgage for your personal investment strategy.
1. Calculate how much you can afford to invest. A broker can help you formulate a financial strategy.
2. Identify and work out other costs (e.g. solicitors, stamp duty, survey/valuation fees, broker’s/lender’s
fees, etc.). Decide which solicitor you will use.
3. Research the market. What kind of property will provide the best returns (i.e. increase in value and
rental income)? Will you manage the properties or will you employ a manager?
4. When you have found a property and checked with that it represents a good deal,
make an offer. Why not use our Forum to discuss the deal with other investors?
5. When the offer is accepted, inform your solicitor.
NB: From this point onwards, you are spending your money. The vendor does not have to sell
the property to you until you have exchanged contracts. The vendor could, for example,
accept a higher offer from another purchaser (‘gazumping’) and you would have wasted your
money. Gazumping is common, so you need to exchange contracts quickly to avoid it.
6. Contact your broker. They’ll research, calculate and provide you with guidance on the right mortgage
to suit your investment strategy. They should ensure you’re in the best position to succeed as a buy-to-let property investor, now and in the future.
NB: As you’ve already seen, you need to ensure your mortgage facilities can be increased in line
with rises in the value of your properties. This is crucial to building a successful portfolio.
7. Contact the vendor’s agent regularly – we recommend every four days – to report and check
on progress on both sides. This will significantly reduce any risk of being gazumped.
8. Speak to your solicitor regularly (good ones will call you) to ensure they are chasing other involved parties.
NB: Try to help further speed up the purchasing process, where possible, by chasing the appropriate people yourself.
Applying for a mortgage
Choosing and applying for a mortgage needn’t be drawn out, painful and unnecessarily complex. A good broker can help simplify the process dramatically by undertaking a lot of the application work, such as organising the credit check and valuation of the property. However, once you have selected a suitable property, there is still a great deal to do before you receive your first rent cheque. At this stage, the expertise of a well-experienced solicitor can make your transition to becoming a landlord a smooth one, leaving your path to completion clear and trouble-free.
You will:
1. Check your credit history.
2. Make sure the application meets the lender’s criteria.
3. If the criteria is met, we’ll instruct valuations.
The valuer will comment on:
• The general layout of the property
• The location
• The value (by comparing recent sales of similar properties)
• The general state of repair and any obvious defects
• The valuer will also suggest a monthly rental figure and comment on the letting market.
NB: If the valuer identifies potential defects, the lender is likely to request a specialist
report, e.g. a Damp and Timber Report for woodworm/damp, a Structural Engineer’s
Report for cracks and a Tree Surgeon’s Report for tree root damage.
4. References may be requested. These depend on lender criteria and may include employer,
accountant and existing lender.
5. If the lender requires any other information, we’ll contact you and/or chase it up on your behalf.
6. Once we’ve got all the information required, we’ll present it to the lender as a complete
package. A mortgage offer is usually issued by return.
Proceeding to completion
1. Once the mortgage offer has been made, the solicitor should then exchange contracts.
NB: Contracts can’t be exchanged until you’ve proved you have sufficient funds to complete
the purchase.
2. The solicitor is responsible for ensuring that you are buying what you expect to buy. This involves
obtaining local searches, making sure all previous mortgages are cleared, checking boundaries, etc.
3. The solicitor receives the purchase money from the lender and forwards it to the vendor.
4. In the case of a refinance, the solicitor also pays off the old loan with the new mortgage funds.
5. Once contracts have been exchanged, the property is legally yours. So you must now insure the property.
NB: Always use established buy-to-let insurance brokers to minimise costs. You must also be aware that many insurers exclude risks on let properties.
Your policy must cover you, for example, for payment of rent in the event that the property
becomes uninhabitable, due to fire, flooding, structural defect, etc. Please contact us for details of the discounted scheme we have access to.
6. Completion normally takes place about a week after exchange of contracts. You may now let the property – subject to its condition.
7. If the property is vacant at exchange stage, it can be a good idea to negotiate a longer period between exchange and completion so you can request access to redecorate/refurbish the property. The vendor has the right to refuse this.
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