5 Steps to Buying Your First U.K. Investment Property
If you are a first-time buyer, it can be hard to get started in property. Here's a step-by-step plan.
So you’ve found a fantastic property deal, and you’re thinking to yourself, "Great. What are the ABC steps to buying this?" You've probably found the property on a property portal or on an estate agent’s website. You have viewed the property. You have done all the calculations and know the return on investment (ROI). You have applied my maxim,“Buy low, rent high, with a property manager nearby.”
Now all you need is a step-by-step guide to buying your first investment property. Here it is.
1. Get a mortgage broker
You will need what is known as a decision in principle (DIP). This is an indication of what a lender is willing to offer you. It isn’t an offer of credit, as they will need to do detailed checks before they can provide that. It is very important to get a DIP, as it will be needed once an offer is accepted by an estate agent.
One good thing about buying a buy-to-let property is that your personal-income requirements will be lower than if you were buying a property to live in. The property should be able to finance itself because you're renting it out. Lenders are more worried about the cash flow from the property than your income in many cases. Of course, many high-street banks will still have high personal-income requirements, which is why you will need an independent, whole-of-market mortgage broker that can search all the lenders for you.
You can find good independent mortgage brokers by asking other property investors for recommendations. If you don’t know any, try asking on property-investment Facebook groups. Getting a decision in principle should be as easy as ringing up a good mortgage broker and spending 15 minutes max on the phone.
2. Get a solicitor
Now you need a solicitor. You should get recommendations for this as well because solicitors tend to be either really, really slow, or they just don't do anything at all, in my experience. That said, don’t let this hold you back. Just find a solicitor that is "good enough" so you have something to tell the estate agent once you make your offer and it is accepted. You don’t need to keep the same solicitor for the rest of time, so don’t stress too much about this step.
Once you find a good solicitor, keep hold of him or her. He or she is like gold dust. Treat your solicitor well and pay him or her well for his or her services.
3. Make an offer
When making an offer, you need to find out what the other party is willing to accept. This can be a hard topic to bring up with an estate agent, as he or she will tell you that he or she will just pass along your offer to the seller. This is correct, but an estate agent normally has some idea of what the seller might accept. One way to approach this is to say something like, “I'm interested. I like the house. I don't want to put in a really cheeky offer, but I am an investor, so I'm looking to get a bit of a deal. What might they accept?”
Sometimes the estate agent will give you some indication of the type of offer that might be accepted; other times, he or she will just tell you to put in your offer. If the estate agent is unable to give you an indication, start embarrassingly low. Remember you are looking to buy an investment property, not your next family home; if someone else outbids you, so be it.
4. Fill out the paperwork
As soon as the offer is accepted, the estate agent will need five things from you. You should get these prepared ahead of time:
1. Photo ID, a passport or driver's license.
2. Proof of address (for example, a council-tax bill, maybe a utility bill or a bank statement that shows your address in the last three months).
3. Your proof of funds. This is the amount of the deposit. You can take a screenshot of your bank account. It needs to show your name and an amount equivalent to, or greater than, the required deposit.
4. A decision in principle from a mortgage broker.
5. Details of your solicitor.
Once you've given those to the estate agent, the estate agent will take the property off the market. The estate agent will liaise with your mortgage broker and your solicitor. You will need to check in every two weeks or so and ask, “Is there anything I can do to help speed things up?” Be polite and helpful, even if you feel they are not acting fast enough.
When the ball is in your court and they want something done on your end, do it fast. However, when the ball is in their court, you have to be patient. You want to build long-term business relationships, and if you are not patient, polite and professional at all times, you will be the one who loses out.
Once the process is complete and you have dotted all the i's and crossed the t's, you will have your first rental property. Well done, and welcome to the property-investment family!
Entrepreneur Leadership Network Contributor