Property advice.

Things to consider when selecting a property - a lot of it applies to a property purchased for yourself to live in too.

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Ok, so once you’ve got your finances sorted you need to find a suitable place to put that money. Although I suppose that, in theory, you could find a tenant for just about anywhere, some places are far more suitable and attractive to prospective tenants than others. The first thing to think about is where you want to buy. A well chosen house in the right area will not only attract lots of people who would like to rent it from you, it will also accrue capital value much more readily than a similar property in a less desirable area and will also be easier to sell should the need arise. That is not to say that upmarket is the way to go, as just by looking around you will be able to see that the vast majority of people (and therefore the vast majority of potential customers) live in run-of-the-mill dwellings.

You do, however, have to be sensible. Just because you can get a house in your town’s worst area for twenty grand less than you can in a reasonable one does not make it a good buy. For starters an area’s reputation can scare potential tenants away and the ones that you do get may not be entirely suitable. The rent will be proportionally less as well, so do the maths first in order to see whether it is worth your while. It is also worth mentioning that the rental market is saturated in some areas. For example university towns, particularly those where at one time properties suitable for student letting were available to buy very cheaply, often have a raft of empty properties sporting ‘to let’ signs even after term time has started. This is something that you need to be aware of.

As a small aside, one potential positive about housing in poorer areas is that the council may have a scheme where they are prepared to guarantee your rent for a fixed period, say three years, and take care of all the maintenance and cosmetic preparation of the property as well. These schemes tend to come about if there is a housing shortage in a particular borough and are well worth looking in to. Effectively you can just forget about the property for the length of the scheme and review it’s value with a view to selling it or re-letting when the time comes, knowing that it won’t cost you anything in reconditioning. But, as a sound and safe general rule, stay well away from the really run down parts of town.

Also, choose with your head and not your heart: just because you personally like a house doesn’t make it a good buy to let prospect. We will come to this later, but think about the type of customers that you are aiming at. For example if you want to let to students, who may well be short of energy from the rigours of university life, then you want somewhere within a few minutes walk of the university at most. You won’t find many potential student tenants for a house that’s three changes of bus or a bracing twenty minute walk away! 

In my opinion one the most important considerations for choosing a house (apart from one to let to students as mentioned above) would be that it is within a few miles of both a railway station and ring road/motorway and preferably on a bus route as well. The reasons are obvious when you think about it. Firstly, and although unlikely in this day and age, your tenant may not own a car, so access to public transport would be essential. More likely reasons are that they may commute to work by one means or another, or they may rent in one area for work purposes but go home at weekends. Whatever the reason, people love convenience and are normally prepared to pay a bit extra for it. 

Avoid houses within sight of pubs or small local shopping precincts, as these places attract trouble like magnets. That is not to say that it shouldn’t be near either or both of those, the shops especially, but just not on a route that involves people going right past your property’s front door to get to them. Avoid houses next to alleyways as well as they are magnets for nefarious activities at night. You may think that I’m being over the top, but I’m giving you the benefit of my own experience here, so listen well. Also houses in a quiet side road are preferable to those on a busy main road. 

A well chosen house in the right area will not only attract lots of people who would like to rent it from you, it will also accrue capital value much more readily than a similar property in a less desirable area and be easier to sell should the need arise. That is not to say that upmarket is the way to go, as just by looking around you will be able to see that the vast majority of people (and therefore the vast majority of potential customers) live in fairly modest dwellings.

As three bedroom semi-detached or terraced houses are the most popular and suit the needs of most people, then these are what you should be buying, if for no other reason than that more people will be able to afford the rent and you'll easily be able to dispose of it when the time comes. You can specialise in renting out six bedroom luxury homes in the future if you want to, but leave them for now. Don’t let lower prices tempt you to go smaller either. Although they wouldn’t be my first choice, two bedroom homes may be ok but stay away from one bedroom houses, cluster homes or flats as they appeal to a much narrower market. That is not to say that they are no good, but by picking the most popular option at first you are giving yourself the best chance of success. 

For your first few ventures, I believe you should be looking at properties in your own area. I.e. the town that you live in, or the nearest town if you live in a rural location. Why? Well you should not be relying on the advice of an estate agent on commission to choose the location for your investment. If you are buying in a town or city that you know nothing about then you are entirely dependent on the honesty of, and the quality of the information given by, the person that you are dealing with there. That is not to say that everyone is a crook, but it is not too much of a stretch to imagine that people in the estate agency business think of anything more than the money that they can earn out of you, at least at first. Repeated dealings may help you forge lasting business relationships and even friendships but trust is earned by someone when they have proved themselves to you. I personally used to know one person who was commuting a fair distance to work and wanted to move to the town where his job was located in order to reduce his transport costs. He took the advice of a local estate agent as to which area to move to and lived to regret it. 

Since these undertakings should be providing for your future you should maintain as much control as you reasonably can. If you stay local you will (or should!) know, by reputation if nothing else, where to avoid in your locality and you should make good use of this ‘inside information’. Equally you don’t want to be driving for an hour to go looking at houses, or when you are a landlord, going to deal with problems.

I don’t know about you but I like an easy life, with the minimum of hassle. That’s a good enough reason alone to keep everything nice and local, at least in the beginning.

When you’ve settled on where and what type of house you want to buy, you need get down to specifics. If you weren’t doing it anyway, then you should start looking at properties for sale on the Internet to get a feel for prices in your target area. Also contact some estate agents and tell them that you are after property for investment purposes and that you are able to complete quickly. There is a choice to be made here as well. Should you go for a property that is immaculate so that you can let it immediately, but for which you will normally pay full (or close to full) market value? Or should you go for something that needs some refurbishment but could be bought somewhat cheaper? My choice would be the second way. Not because I like DIY, but because on houses that look a bit rough then you can normally drive a very hard bargain. Why is this important? After all our intention is not to fix the property up and sell it on. Well you might consider that a bit more carefully if you could quickly turn it around and pull thirty or forty thousand pounds out of it. This is not unrealistic, as houses seem to sell mainly on the way that they look and five to ten thousand pounds spent on cosmetic improvements could easily result in such a gain in value, depending on whereabouts in the country you live. That money could then form the deposits for a couple of buy to lets and get you off to a flying start. Another good reason is that if you can get a property which is cheap in comparison to its identical near neighbours and spend a little on it to bring it up to the same value, you will be helping to proof yourself against any downturn in the market which might see a house purchased at the full price slip into negative equity.

By the way, when I say run down houses, I do only mean ones that are cosmetically poor, not rebuilding projects. Run a mile from anything that is structurally unsound or needs any major work. They can almost never be finished as cheaply or as quickly as you imagine and are best left to professionals. Stick to properties in need of redecoration and light work, such as new windows, kitchens and bathrooms, re-pointing, new guttering and damp proofing etc. If you are unwilling or unable to do these jobs yourself then there are plenty of people out there who are and if you do some shopping around and cross comparing of prices then they needn’t be that expensive. Go and get yourself a trade account at a builder’s merchant such as Travis Perkins and find a local trade supplier of windows and doors. If you’ve ever paid full retail for any of these things (especially the windows) you won’t believe how cheap they are. These places may insist that you are in the business before they give you an account and may ask to see some proof, such as a letter head or a business card. Producing either of these things should be no problem if you have a PC and printer at home. 

A little bit of effort in this area could save you (and make you) a pile of cash. People selling their houses who don’t bring them up to scratch before bringing them to market are probably short of money, brains or both. Either way they are going to be a lot easier to negotiate with than someone who is totally switched on to the ins and outs of the property market, if only because a house in apparently poor condition gives you a lot of ammunition to chip away at the price with. We’ll talk about negotiation later on. By the way, if you’re going to buy a house with a view to turning it around quickly then you must make sure that the mortgage you’ve arranged doesn’t have any redemption penalties for early settlement. The last thing that you want to be doing is giving some or all of your profit to a bank or building society for the privilege of getting out of one of their mortgages. 

Another good way of getting houses that are cheap for their area is to get them from the families of old people who have died. This is not as ghoulish as it may initially sound. As people get older they tend not to be interested in keeping up with the Joneses and having the latest flash kitchen or bathroom suite etc. When they die and their family are trying to sort out their estate the house may just be put into the hands of an estate agent to sell. The family will most likely be interested in turning the house into money as quickly as possible, especially if there have been probate delays and or there is inheritance tax to pay. This situation can pave the way for a very favourable deal. It’s worth spending the time and effort to cultivate a good relationship with estate agents here so they can tip you off when this kind of house comes onto the market. In fact I know of one landlord who pays his friendly estate agent cash in an envelope every time the agent can secure him one of these deals at the quote "right price" unquote. Not behaviour that I could commend, of course, but effective none the less.

In fact (to go off on a tangent), making a concerted, but subtle, effort to befriend all the people whose services that you will need to make use of in the property business, from the solicitor to the painter and decorator, will pay dividends later on. Remember the old maxim; it’s not what you know, it’s who you know. Always bear that in mind, as it’s one of the most truthful sentences ever put together. People will go the extra mile for someone that they know, or more correctly, someone that they like! So make sure that you are, or least do your utmost to appear to be, someone that people like. Being polite to people that irritate you and laughing at their awful jokes should just be the beginning. People can see through fake flattery a mile away so practise being genuinely interested in people rather than just being sycophantic. Always try to be genuinely grateful for anything people do for you. You will then stand out a mile from the 99 percent who aren’t, or at least don’t appear to be. A thank you card here, a bottle of wine or a bunch of flowers there, all of these things cost next to nothing but leave a lasting impression. Of equal importance is the fact that, repeated over time, they build a sense of obligation. After all, if someone that you don’t like rings you up asking for a favour when you’re busy or on your way out of the door, you’re quite likely to say no. Whereas if a friend or someone you hold in high regard asks, then you will probably say yes. Always bear this in mind and act accordingly. If someone you’re needing to be friends with for business reasons invites you out for a drink or to some do or another then go if you can. If you really don’t want to then don’t try and think up an excuse on the spot, you’ll just look awkward. Say that you need to check your diary and that you’ll get back to them. You can then think up a reasonable excuse.

This leads me to another point. If you say that you are going to do something, then do it. Almost nothing rubs people up the wrong way more than a promised call that never comes, a promised favour that never materialises or anything else that you’ve put your word to and then don’t deliver. Even though it happens all the time, people never get used to it. Doing it once may be forgiveable, but doing it repeatedly will surely destroy all of your hard work in other areas, no matter how much of a nice person that you are. Also, if it happens to you then don’t ring the perpetrator up and berate them. People hate losing face, even when they know that they are blatantly in the wrong, so don’t put them in a position where they might have to. Ring them up and apologise as though it was your fault. Even if you’ve been sitting waiting for them, make out that you had an emergency and had to go out. Apologise profusely for missing them and ask if they’ll rearrange whatever it was they were supposed to do. This will make everyone except a psychopath feel incredibly guilty and they may even confess their guilt. Even if they don’t, then they are unlikely to let you down again. If they do, then they are not the kind of person that you need on your side and you should start looking for someone else to supply whatever service it was that they were offering.

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