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How do you experienced proven buy to let property investors analyse if a deal is absolutely water tight?
what do you factor in which others miss out when looking at deals?
For example, do you always take 10% off what the estate agents are saying the property "could" get in rental income per month?
Do you include expenses which most people would miss out?
What do you look for in a deal to make it an interesting investment for you?
The first thing is to assess tenant demand in the area. Without tenants wanting to rent the property, all of the above is a moot point imho.Too many newbies focus on "the deal", not what happens afterwards - being in a 25 year relationship with that property. If no one wants to rent it, then it doesn't matter what discount you get, it won't serve you and will always drain you of money. Even when there is demand, the quality of tenants may be poor, meaning rent arrears, high tenant turnover etc.So finding the tenant demand and the demographic of the tenant who might rent it - be it young professionals, families, sharers, people in receipt of housing benefit etc - is the first part of sourcing any profitable property deal imho.Many people create the supply and hope there is a demand. Smart landlords find the demand first, before they create the supply.How to assess tenant demand in an areaOnce tenant demand has been assessed, you then need to look at actual sales (not asking price) and actual rental (not asking price) comparables.You should consider your property goals and ambitions and see how that particular deal helps serve them. If it doesn't, then walk away. Finally, you should track forwards in time, and think about the exit of that property. Who will want to buy it from you? I always purchase properties that I believe will be popular with owner/occupiers, so I avoid turn off's to that demographic of buyer.There is a huge amount of additional information in these threads:Top 10 Property Tribes resources to learn how to find property deals Anatomy of a profitable property dealHope that helps for starters?
Vanessa Warwick Landlord and Co-Founder of PropertyTribes.com **If you have got value from Property Tribes, find out how you can support it in remaining a free to use community resource**
If you make risk adjustments to everything you cannot ever do a deal. You need to assess what you see are upsides and downsides only and see how they offset each other. Also look at what risks you are comfortable with. For example if a typical local agent charges 12% but you have found one at 10% are you sure it will remain at 10% or should you factor in 12%.
With property like all other investments risk is a personal perspective. It is why investing for others is hard.
Chartered Accountant, Tax Advisor and Mortgage broker
(and BTL portfolio owner)
There is no water tight deal. There are always risks involved, you will always find reasons not to go ahead with a deal.
When I bought my first investment property I was scared out of my wits, took my parents (they said no), my best friend (she said no) and my trusted builder friend (he said yes).
As Vanessa said, you have to have solid demand to have a viable business.
Listen politely to what the estate agent says then go home and research sold and let prices.
Never ever buy the best house in the worst street. You hope the rest of the area will rise up to its standard, but in reality it will sink down to theirs. Good tenants do not want to live in a bad part of town. No matter how nice the property.
a mistake I made a long time ago that cost me dearly, but taught me lots.
From the archive on that very topic!Would you buy the..worst house on best street or best house on worst street?
My biggie is to not trust planning officials. I did once, three of them in the same council told me that my planned extension would probably be approved, I had the plans drawn up exactly as they advised, paid all the fees, waited 2 months for them to decide and they rejected it on the last day. And then they told me that’s I could reapply if I pay x in fees!!!!
Luckily this was in a fast market and by the time they messed me around like this prices had moved on and I sold as is for £60k more.
I understand of course that risk is involved in any investment, perhaps i phrased it wrong.
Firstly when i think of the word "deal" I am not thinking of just how much i buy the property and if it rents but i am also thinking of the exit of the property also. Great advice Vanessa as always..
But do any of you have like a check list or a formula you use when looking at property investments? How do you determine whether it is worth going for or not?Btw i am not asking for a magic formula, just a process you go through in order to get to a decision.Thank you
Well it has to "stack up" for starters, from a finanicial/lending point of view.See - 5 ways to assess an investment property without leaving your house
Do a spreadsheet to focus your mind.
Write down your cash amount -£15k. If aiming for a 75% LTV mortgage this will give you your spending budget, add SDLT, buying fees (£2000) and £5000 to set up the tenancy for a property in good condition. Now you know your spending budget and cash required.
Work out your monthly mortgage interest payments, add service charge and a reserve for maintenance (£200/month). Now you know the bare minimum rent you should achieve just to break even.
Now open Rightmove and do a search around where you live (this is the area you are most familiar with and you will save a lot of money by self managing) set the price as your budget + 30k and start with the lowest price properties. If there is nothing in your budget in your area then keep widening your search area until you do find something.
Mr Clarke's Ten Streets Strategy would be good advice here if someone could kindly post a link to it