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How To Execute A Buy To Let Property Investment In The UK?

 

Have you found a lucrative buy-to-let property in the UK? Here’s a step-by-step guide to executing the investment.

Start by making your offer. Then hire a solicitor and surveyor to guide your decision. After negotiating your price, set a contract exchange date and completion date, then follow through. That’s it!

In this article, we explore these steps in detail. We also show you the mistakes to avoid, how to calculate your return on investment, and much more. So stick with us and read on!

What is the process to buy and let a property in the UK?

Let’s start with the basic process first. How exactly can you buy and let a property in the UK? Here’s what you need to do:

1. Make an offer and get it accepted

Once you are ready to make an offer, you can make it either in writing or verbally. The offer includes the price you are prepared to pay and other crucial factors like the DIP.

For instance, if you are willing to use a mortgage, you can show the DIP, informing the party that you are ready to finance once accepted.

Ensure to include “subject to contract” in your offer. That way, the agreement doesn’t become binding once the terms are accepted.

Once the offer is accepted, your estate agent will issue a “memorandum of sale” and confirm all agreed-upon terms. 

You will also have to provide information about your solicitor. A copy of the letter will be sent to them.

Remember that accepting an offer might be good news, but nothing is guaranteed until contracts are exchanged. This is because the offer made is not legally binding in England and Wales. 

The buyer or seller can withdraw from the offer at any time if they find something suspicious during the conveyancing process.

Conveyancing refers to the legal transfer of property ownership from the buyer to the seller. It begins with the offer being accepted and ends once you receive the key. 

Make sure to be communicative and proactive throughout the process to help your offer get accepted. 

2. Make sure you can complete the transaction

First, you have to make sure that you have enough resources to buy the property. If you want to purchase using cash, just ensure to save enough for stamp duty and other costs.

Before you find an opportunity and get ready to seal a deal, it’s crucial to be in the position to buy. You will be incurring certain costs, such as a legal fee, which you won’t get back.

You can also buy a property using a mortgage. When doing so, ask your broker to help you secure a “decision in principle” from a lender.

It will show that the lender has evaluated your position and has agreed to lend money to you. Although it’s not a binding offer, it’s good to have it.

3. Instruct a solicitor

Your estate agent will send the memorandum of sale to the solicitor already, but it’s also crucial that you contact them to be sure of the entire process.

If you don’t have a solicitor, find one right away. The solicitor will guide you through the entire process and all the legalities involved.

When hiring a solicitor, make sure to get a fixed quote for the transaction. Also, look for someone who has been in the industry for quite a while. 

You will then have to sign a “client engagement letter” and perhaps pay an advance fee.

4. Appoint a surveyor

Although it is not mandatory to appoint a surveyor, it’s highly recommended. A surveyor will inspect the property and give you a detailed report regarding its conditions.

If you opt for a mortgage, your lender will need a property valuation survey before officially releasing your funds. 

The survey will mainly evaluate drainage, drain, timber condition, woodworm, and more if it’s a listed property.

5. Negotiate

If a solicitor returns to you with some problems with the property, it will be best to negotiate the price. 

It might make the offer more lucrative. But it also ensures that you invest in the right property with the resources available to you.

6. Set an exchange date

If the negotiation is successful, and there are no problems with the property, then set a date for the exchange of contract with the seller.

The date can be set within the period set by the mortgage lender to release the funds. Usually, it is anywhere from three to six months.

7. Exchange the contracts

Once all the paperwork is completed, both the buyer and seller will exchange the contracts. This makes the agreement legally binding.

With the contracts exchanged, the buyer has to pay an exchange deposit to the seller. The exchange deposit is usually 10% of the property price and shows that the buyer will buy the property. 

In case you back out, the seller can sue you and keep the exchange deposit with themselves. 

On the exchange day, your solicitor will send the deposit to the solicitor of the vendor.

8. Moving towards completion

The completion date is usually set before the exchange takes place. Before this date, your solicitor will request the lender to release the mortgage funds. 

You will also get an account statement once the funds are transferred to the client’s account. 

As things run smoothly, you or your agent can collect the keys, and you will be the official property owner.

How To Execute A Buy To Let Property Investment In The UK?

How to calculate returns on a buy to let in the Uk?

One of the easiest ways to calculate the returns on your buy-to-let is through a free return on investment calculator. This will save you a lot of time and hassle.

You can also calculate the returns on your property through the following formula:

             ROI = (Annual Profit / money invested) x 100

Annual profit is the annual rent minus all the costs incurred in holding the property, such as insurance and management fee. 

The amount of money invested may include purchase price, stamp duty, solicitor fee, etc.

How can you tell if a deal is a good deal?             

The best way to evaluate a buy-to-let deal is through a comparative analysis. The comparable analysis allows the buyer to compare the most recently sold properties in the closest proximities. 

To do this, you can use online portals to conduct some market research. For instance, you can visit the right move.

The portal will allow you to see the prices of different properties sold in your preferred area. You can compare other freehold properties and even view the pictures of the property.

When comparing the property, ensure that it has a similar construction style, and the property was sold recently to have an accurate view of the market trend.

Ideally, have at least three comparables. You can then add the selling price of all the properties and divide it by the number of the properties.

You will then get an average number that will show whether the agent has inflated the fair market value or not.

Using this method will allow you to make a very profitable decision.

How To Execute A Buy To Let Property Investment In The UK?

Mistakes to avoid when executing a buy to let in the UK?

Here’s a list of mistakes that you should avoid when investing in a property.

1. Waiting for right the opportunity to come

To be a successful investor, you need to make the best out of the opportunities that come your way. You should check your resources, evaluate what the property offers, and make a move.

If you keep on waiting for the perfect deal to come in your way, then you will keep on waiting. 

2. Not being motivated enough

If you sit back, waiting for the opportunity, and then just shuffling back and forth even when you have found the right property, you will be unable to do a consistent business.

3. Investing with emotions

Those who invest with emotions will fall for what the property offers outside instead of thinking about the profit. This simply wastes the financial resources of the investor.

Imagine you find a property that is not only beautiful but is located in a perfect area as well, and the seller seems confident about it. But when you look at the numbers, it doesn’t seem very profitable. 

4. Investing for short-term goals

When buying a property, you need to evaluate its potential in the long run. You need to determine whether it can be profitable for a long time.

5. Buying because the property is cheap

Some properties in the UK can be really cheap for sure. But a low price should not be a determining factor to settle on a property when you can perhaps buy a better property with a little bit more investment.

Make sure to do your market research and compare the property with other properties in the area.

6. Not knowing your investment goal

Many investors aren’t always sure why they are investing or what kind of capital gain they are looking for. This might prevent you from finding the right properties.

7. Ignoring contingency

You will have to plan for any sort of contingencies that might arise after buying a property.

Investors also make the mistake of not planning for future circumstances. 

For instance, the property you have just bought might require instant renovation like water pipeline and electrical wiring. 

If you haven’t set some money aside to cover these costs, you will make a lower profit.

8. Insufficient due diligence

It is crucial to do your due diligence on the property, the area, and the owner to evaluate the property’s commercial potential.

How To Execute A Buy To Let Property Investment In The UK?

Other common questions about buy to let in the UK

Is Buy To Let for a beginner, intermediate, or advanced investor?

Buy-to-let is a very opportunistic strategy for everyone looking to invest in properties, whether they are just starting in this field or have sufficient experience.

What is the best time to invest in the property?

There’s no specific time when you should invest in the property. Instead, you should invest whenever you find a lucrative property to buy.

Which type of property should you buy?

The right property adds value and brings a good return on investment. It’s not entirely something that is located in a stunning area. 

Which area should you invest in?

The UK has plenty properties to look for. It all comes down to your market research and the value a property brings in.

Conclusion

To execute a buy-to-let property investment, start by making your offer. Then, you hire a solicitor and surveyor to advise you. After this, negotiate your price with the seller. 

After negotiations, meet up on your contract exchange date and completion date. Sign all the papers, and get the keys to your property!

But before you execute the investment. Calculate your expected return on investments using the free ROI calculator. Also, do a comparative analysis to get a fair price.

Don’t let the opportunity pass. But don’t also invest with your emotions. Use the numbers to determine your gains and jump on your investment.

Remember that cheap is not always good.

With proper guidance and money, anyone can invest in a buy-to-let property. Just do your due diligence.

Want to know more about this remunerative business? Sign up at our website to access free resources. 

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Fabrizio Cravero

Fabrizio Cravero

UK Property investor

Fabrizio is sharing his knowledge about investing in UK properties from overseas. He is based in Hong Kong and provides weekly guidance to his followers.

Fabrizio Cravero

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