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How To Do Your Due Diligence When Investing In Property

How To Do Your Due Diligence When Investing In Property

With any investment, there is a form of due diligence involved to make sure you know where your money is going. Though it can be time-consuming, it is worth it and your bank account will thank you. This should not seem that daunting as there are some simple guidelines to follow. For a specialist property investment company UK, contact us to discuss your options for investing in property.

The Three Stages Of Investing In Property

Before you even reach the due diligence stage, there are two prior stages to go through. Do your research and look at the market and where you can see some potential opportunities. Try to look for specific properties and create a range that offers some different options.

Choose Your Power Team

It will not just be you carrying out the due diligence so choose your power team. Surround yourself with the ideal people to make the correct decisions. That’s typically a mortgage broker, solicitor, property sourcing specialist, and letting agent. Use them to work out your finance strategy and your yield, even your portfolio.

Decide On The Area

If you are choosing to buy-to-let or buy-to-sell, you may want to consider a local property. This is a hands-on approach to property investing so you should live nearby. The local area should also be attractive for tenants. That could mean students with a nearby university or tenants close to the city center with nearby amenities.

Take A Good Look

If you choose to invest in Scotland, you should get a home report which offers some detailed information. There is also a range of safety certificates which should be up-to-date. Ensure that you check the roof and insist on a roof inspection. Finally, consider the lifecycle maintenance to gain an understanding of what work needs to be done after the sale is completed.

house design

This sounds obvious but arrange a viewing and do so quickly. The property market can be incredibly speedy and properties can be gone quickly. In some cases, house buyers will not even view the property before putting their offer in. If you do get to arrange a viewing, ask enough questions of the people living there before you put an offer in.

The Budget

Working out your budget may be the most important aspect of due diligence. There are the transaction costs involved, the building costs, and the mortgage. You have to think about the initial outlay as well as any development costs or bridging finance. Try to arrange an agreement in principle first.

This all needs to be weighed up against the potential rental yield. Should you let the property out to tenants, you may be able to work out an attractive and lucrative rent amount. Look at the rental market in the area and you should be able to come up with a realistic figure.

Your Finance Strategy

Depending on your finance strategy, you may be restricted to certain properties and a budget. You want to ensure that the property is viable for your budget and will turn in a profit. That can depend on how time constrictive your finance strategy is and whether you rent it out or renovate it.

Legal Restrictions

This is a crucial yet somewhat tedious part of due diligence yet check the legal restrictions. You may be able to do this online so confirm if the land title has legal restrictions. These could be covenants or easements. You may even need to apply for planning permission if you want to do some work on the property.

Put In Your Offer

One central consideration for your offer is the price against value. Make sure that you invest in a property that is below market value so you do not overpay. Check the sold prices on properties you can compare against and make market comparisons. With the right address and property, the offer should be just right and, hopefully, successful.

buying property

Summary

When you are investing in a property, you should be prepared to complete your due diligence. As well as the property itself, you need to consider your own budget and finance strategy. Take a good look at the property and check all the relevant legal restrictions before putting in your offer.

Also, consider the type of target market you envisage for the property itself. If it is students, is the city center and university close by? For families, a school should be nearby. Look long-term and ensure that you can look after your investment in a timescale that is right for you.

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