The perils of slipping up when you’re investing in off-plan or stock property
If it’s your first time investing in off-plan property, you’ll probably need a guiding hand to make sure you don’t fall at one of the many hurdles in your way. I’m not talking about finding a suitable investment opportunity here – you’ve already done your research and due diligence. The numbers stack up, and the investment is good to go.
What we want to discuss in this final chapter are the often overlooked risks in the process of purchasing a buy-to-let property. We’ve witnessed plenty of beginner investors make the same mistakes time and again. We’ve also seen experienced investors trip up. Wanting to help investors like you avoid these mistakes is the significant reason we set up our Sales Progression Team.
So here they are – the top nine mistakes that buy-to-let property investors make when moving from decision to buy through to completion. Each could cost you thousands.
1. You use the wrong solicitor
There are several pivotal relationships in the process of buying property. Perhaps the key one is that between you and your solicitor, and we can’t overstate how important it is to get the right solicitor on board and on your side.
A great many investors buying their first investment property think that the solicitor’s job begins and ends with conveyancing. This is based upon the experience of buying a home. But an investment property isn’t a home. It’s a box to make money. With that comes the need to take into account a range of other considerations. These include your tax position, the complexity of the purchase, and your long-term goals (for example, inheritance).
The risk of using an inexperienced solicitor, or one that lacks the expertise to handle buy-to-let property investments, is that you will receive advice that is inappropriate or incompatible with your investment aims.
2. You use the wrong mortgage broker
Financing your buy-to-let property could make or break the deal. A £150,000 mortgage agreed at a rate of just 1% higher than another will cost more than £37,000 extra over a 25-year term.
Also, you’ll need to be aware that the mortgage you need for a buy-to-let property is different to an ordinary residential mortgage. Lenders have different rules, and some buy-to-let lenders are regulated.
The mortgage broker you select to help you find your financing should understand the buy-to-let market, have good connections in it, and be able to evidence their ability with client testimonials and recommendations.
If you haven’t got the right mortgage broker, it could either cost you a small fortune in the long run or ruin your chances of completing on the investment purchase you want now (probably with the loss of your deposit).
3. You make mistakes with the paperwork
Paperwork: a necessary evil in any financial transaction. From ID to anti-money laundering documentation, mortgage applications to exchange contracts, you might at times believe that you’re drowning under a sea of paper.
Here’s the thing: if you fail to sign a document that needs signing or answer a question that needs answering, or send some paperwork in a little late, there might be no solution. You could scupper your investment without realising it. That’s one reason to use specialist mortgage brokers and solicitors: part of their responsibility is to make sure the paperwork is handled professionally.
4. You lose focus because of complexity
We all handle situations differently, and for some the complexity of the process – with so many people and procedures involved – makes it difficult to focus on what needs to be done at any given time to move on to the next stage. Everything in the process is interlinked, and it can be mind-boggling.
For those who have a full-time job (that’s most property investors), it’s difficult to remain focused on the investment purchase when there’s all this other stuff going on in their day job. Something gives, and 9 times out of 10 it’s the property purchase; and when you drop that ball it’s almost impossible to regain control of it.
5. You miss deadlines
Whether it’s because you lost focus or got busy at work, or sent away your paperwork incorrectly completed and signed in the wrong place (or not at all), a missed deadline is going to cost you. If you’re super lucky you’ll be dealing with a lenient and understanding developer who will let the deal slide a day. You probably won’t be so lucky with a lender.
Any missed deadline is perilous to your property investment.
6. Your mortgage application is refused
There could be a number of reasons that a mortgage application is refused, and most of them are avoidable. As we’ve already discussed above, shoddy paperwork, missed deadlines, and even applying for the wrong type of mortgage are all mistakes that investors make.
Unavoidable events might include that you’ve lost your job, but the one that you’ll find most difficult to deal with is when the buy-to-let mortgage lender changes their rules before final agreement and release of funds. When this happens (not often, but it’s a definite possibility), a mortgage broker with buy-to-let experience and extensive market connections is worth their weight in gold.
7. Your property is below par when the build is finished
There are always – without fail – some issues that need to be addressed when an off-plan property is finally completed. When you do your snagging inspection, always take a professional builder or building inspector with you. You’ll probably notice an unpainted window sill; they’ll pick up on every under-delivered detail.
This inspection is essential before final completion. Without it, or for anything that you don’t report as being amiss, there is no turning the clock back to get the wrongs put right. You could end up with a property that needs a lot of wrinkles ironed out, all at your own expense.
8. You find it hard to let your property
OK, so this mistake and the next are technically nothing to do with the progression of the sale, but you should take heed.
There have been hundreds of investors fall at this hurdle. They’ve negotiated the purchase process, and should be enjoying valuable rental income almost immediately. But they haven’t done their research, and ask for too high a rent. Then they refuse to budge on price. Or they market to the wrong sector of the market, and never have a request to view.
It may be that they’re competing in the right market, and have priced perfectly. Yet not a single viewer makes an offer of rent. Perhaps they should have considered including Wi-Fi or white goods, or offering as a furnished property to compete on a level playing field with the competition.
9. Your property investment becomes a full-time job
Look, you didn’t make an investment in property to become a full-time landlord, did you? Most people don’t, but those who take the DIY landlord route quickly find that there’s more to making money from a buy-to-let property than simply investing and sitting back. What do you know about marketing your property, and vetting prospective tenants? And how are you at chasing rent, managing maintenance men, and taking emergency calls about burst water pipes at two in the morning?
Avoid the mistakes with progression and Ezytrac Property Management
Working with a sales progression manager brings an experienced buy-to-let investment expert on board from the off. They’ll make sure that you get the best advice, and can introduce you to equally experienced solicitors and mortgage brokers.
The progression manager will coordinate the purchasing process, liaising between all parties and giving you a single point of contact to reduce your need to be constantly on the phone. They’ll chase the developer for updates every week, help to keep your paperwork on track, and provide solutions if and when things do go wrong.
Then there’s the Ezytrac advantage – we’ll get on top of marketing and letting your property before it’s fully on the market. We’ve got a national reach and a local presence, with a large bank of clients and the experience and contacts to find ideal tenants quickly.
We’ll keep you informed as we monitor progress to getting your first tenants – the majority of our clients see their property tenanted within two weeks of completion, thanks to our diligence.
From there, we’ll make sure that you benefit from the rental income and capital gain potential of your property in the most stress-free way possible, as you take advantage of effortless property management.
If you have question or want to learn more about this why not chat with the team 01522503717 or email me.
Head of Sales Progression
If you have sales progression questions I am happy to provide detail answers to even the most detailed problems you face.
Email me at email@example.com
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