What are the three most common mistakes that property investors make when buying buy to let property? The first is not finding out why the property is being sold. The second is taking the estate agent's word on its rental potential. And the third is not knowing exactly how much the refurbishment is going to cost.
Today we are looking at the 3 most common mistakes property investors make when looking at buy to let property. These are not asking why the property is being sold, taking the estate agent's word on rental potential, not thinking hard enough about their budget...
1. Why is the BTL Being Sold?
Everybody knows that they're supposed to do this but the reality is that few people actually ask the vendor or the estate agent why the property is being sold. When you are looking at a potential, buy-to-let property it’s important to know if, for example, there's a problem with the local area or one with the neighbours. You might not always get an honest answer but if you get a dishonest answer then there's a good chance you'll pick up on that. When someone isn't telling you whole story you can sometimes tell. Simply asking that one question can give you a lot more understanding as to whether that buy to let property is really a good one and if there's a legitimate reason for sale. It will be key in making sure you buy the right property, avoiding the wrong ones.
2. Don’t Take the Estate Agent’s Word On Rental Potential
Just that. The second mistake many people make on buying a buy to let property is going on the estate agent’s word for the potential for renting that property out.
So what I recommend is that you speak to other local letting agents and that you take the opinion of the seller and the estate agent with a pinch of salt. Do your own research. For instance, there is plenty you can do with Rightmove, Zoopla and SpareRoom to determine the rental demand of an area and that's just the first step. You want to get as much guidance and advice from as many different people as possible to make sure you’ve opinions are as educated and rounded as possible and this is how you will find out if the property is going to work.Not all estate agents are set up as letting agents and they won’t always have the background to be able to assess how successful a particular area may be on rentals or how easily a particular property might be to let out. So a word of caution, you shouldn't take the estate agent at their word for a property's potential, rental yield. When it comes to renting that property out you'll need to think long term. You might have it for six months, six years, ten years, twenty. The estate agent is not thinking in this way.
3. Refreshment Costs
The third mistake investors make when it comes to purchasing buy to let property is getting the refurbishment budget all wrong. Click here for our report into managing refurbishment costs.
You won't be able to calculate your return on investment if you don't know what it is going to cost to get the property to the level you require. It may require some electrical rewiring work, It may require a brand new boiler. It may need painting, decorating or require new carpets. There may be a whole host of things to do so it’s important to budget correctly for getting the property to a rental standard that you're happy with.
So don’t just go to view a property and then take the owner's word for the condition it's in. You need to know how old the boiler is. You need to make notes and take some pictures if you’re able to. You need to consult with refurbishment teams with as much information as possible. Ultimately you need to have a fully formed understanding of what the cost of any refurbishment may be before you invest in any property.
If you then take into account these three factors it will help you avoid doing a lot of the general and easy mistakes that people make when buying a buy to let property.