Commonly asked questions on Sourcing, Refurbishment, and Lettings to get your head around before you buy a UK Property Investment
What should i pay for a Solicitor?
There is a happy medium to balance here. When it comes to solicitors, you get what you pay for. If you get a local solicitor, expect to pay a smidge less than £1000, but proceed with caution. The quality of local conveyancing varies massively. Some are excellent, and others are dreadful. Nothing worse than employing a local solicitor, thats handling far too many cases, and is happy to take 4 months slowly progressing your case and ignoring emails. We even see some solicitors who ‘treat emails as post’, and will aim to reply in 3 days. Reach out for a list of these types.
On the other hand are the expensive solicitors that get the job done. Typical price averages out at £1700, not including searches. Yes, more expensive, but when you have paid your broker, your survey, searches, sourcing fee and any other extras, if a deal falls out of bed because you skimped on the legals, it will leave you with regret, and a hole in your budget (unless you took insurance). A good solicitor can make the difference, and ours frequently does, even when dealing with a local solicitor on the other side. They frequently obtain docmentation for the vendors solicitor, send it to them, and instruct them to include it in the contract pack, rather than wait for weeks for them to do it themselves. The saving in rent alone make using a good solicitor worth every penny. Again, we have a list of solicitors that speak Cantonese and English if you are looking for suggestions.
Small note, there are a few of the medium sizes companies that charge the premium, but offer a local service. Read our article on finding a good solicitor to get some tips on how to root these out before overpaying…
In short, Pay the £1700, complete quicker, have less stress for each deal, invest more frequently!
What should i pay for a Survey?
Lvl 2 – Home buyers should cost £475-£500.
Lvl 3 – Building Survey should cost a bit more, around £700. This survey doesn’t include a valuation.
However, these are with survey companies. All they so is surveys, and so they can book you in quickly, and generate a report in a few days normally. They will be reliable. The other option, which is actually a better option if you can find a good engineer, is to go to a structural engineering company and ask them for a survey. This will usually cost less, we pay £320, and will (like the local/personal estate agent) be more thoughtfully compiled, as the business owner’s name is on the door. There are some incredibly skilful engineers and builders with alot of formal qualifications out there to find. If you speak to someone, and they are pouring the knowledge out, it’s likely they are highly skilled and experienced, so a survey from them, rather than a surveyor, will likely be better. Careful with this strategy, they still need to be qualified, and generate a report for you, but the added bonus that they will be able to survey the property, tell you whats wrong AND capture any works is really valuable. Just need to find the right one! For a simple valuation though, get the Level 2 Homebuyers and get it booked in with a big company who can complete it in good time… always helps with the purchase if the survey has been completed early!
What does a letting agent charge, and can you help me find a good one?
It depends what you want. We have articles that address this directly, but in short;
6-8% if you go for a big corporate agent. Their strengths are in the legal and administrative elements of letting property. They will likely be used to evicting tenants and manage more as a paperwork exercise. Cheaper base rate and will be a good support if things go wrong, although they do seem to head towards the Section 8 in the eventuality of issues a little too quickly for my liking.
10-12% if you go for the local expert, privately run agency with their name above the door. Yes, you will pay more, but they will likely know your property intimately, will have their own team of handymen, and their reputation to protect. In the eventuality of issues in the tenancy, this type of agent is more likely to ‘negotiate’ and ‘mediate’ a lot better than the bigger agents. It’s in their best interests to work with a tenant to bring about a solution to a problem, rather than end up in court as they likely wouldn’t have a dedicated team for this purpose, like with a bigger agent.
For a checklist of things to ask, check out the Blog section of our site.
I'm buying a property with a tenant already in it, what should i be careful of?
There are a couple of things to be careful of when buying a tenanted property.
Firstly, you wont be able to hike the rent up as soon as you buy. The market rent may be £575, but if your tenant is paying £475 you can only increase incrementally every 6 months or so. It may take a couple of years to get to the market rent. This is still the case if you improve or refurbish the property. Evicting a tenant because you wish to increase the rent is not legal as well. Only a Court or a Tenant can end a tenancy agreement, and a Judge won’t consider this as a reason. It’s also unethical to do this.
Make sure that your solicitor is in receipt of the ‘Rent Authority Notice’, signed by the tenant. This is the document that gives you as the new buyer the right to collect the rent. If the tenant refuses to pay you rent and it goes to court and you haven’t issued a new AST with your name on it, there could be trouble, so make sure the tenant has acknowledged you as the new Landlord and agreed to pay you the rent. Your solicitor should also sort out the rent apportionment so that if the property completes half way through the contract month, you will receive half of the rent.
A ‘sitting tenant’ is not the same as a ‘tenant in situ’. With tenancies starting before 1989, tenants had ‘security of tenure’, which means they would have the right to reside at the property under the 1977 Rent Act, and thus will have more rights to resist any changes to the tenancy or the property. This is the true meaning of a ‘sitting tenant’, although the phrasing seems somewhat interchangeable in marketing. So if you are purchasing a property with a long standing tenant, it’s best to check the start date. If you as the new owner are looking to overhaul the property, and in doing so the property will be unliveable, this is grounds to ask the court to end the tenancy and you can evict temporarily, or permanently and increase the rent, but if your tenant has security of tenure, this may not be as clean cut. Worth checking.
What areas do you source in? and Why?
We invest in different areas for different reasons. Depending on your long term goals in property and how much investing you are plannign on doing, this will dictate to a large extent, where you might invest.
Investing for long term capital growth is the most common strategy, over investing for cashflow. Both are viable in the UK, which makes it such an attractive investment opportunity for Overseas Investors. There are some areas like Kent that will deliver both, but the tradeoff is the cos of entry to the market. First, each of our clients will need to decide what their long term goals are, make a plan, or a written statement to anchor this (as having it in your head is not a good strategy, as the brain has a tendency to skew based on how it feels) and from there we can choose a strategy and an area.
For capital growth, we like Kent and Manchester
For cashflow, there is a wider pool to choose from, and we target areas of the North where 8% or higher is achievable.
It’s important to note that not all investments are equal, even if the numbers are. A Pro-Tip is to obtain or download the Local Town Plan for the areas you are interested in, look at the next 20 Years of planned redevelopment and infrastructure improvements (or lack of) and pick areas that are marked for future sustainable growth based on supply of better amenities AND demand, not just a greater demand for housing, which is common everywhere.
How can i make the purchasing process as short as possible? Are there any tips?
Most easily answered by a short list of bullet points. This is the most effective way we have come across to reduce the time it takes to buy. There are a lot of factors that affect in the long run, but, buy ticking off every item in this list, i can guarantee you can save weeks, or even months…I know this from personal experience.
- Prepare your AML documentation Before you start. This means having your certified documentation ready at the point of offering.
- Buy with cash, refinance after when the property is safely yours.
- Instruct your solicitor on day 1 and submit searches in week 1
- Inform your mortgage broker as soon as your offer has been accepted to get going with the valuation of the property if you are buying with a mortgage
- use a high street lender, rather than a niche lender that will require their own solicitor to be instructed. We have a blacklist of lenders that take 4-5 months to issue a mortgage. We are happy to share the biggest culprits with you if you contact us!
- Make sure the memorandum of sale has been issued within 1 week, and that the vendor has instructed their solicitor. You would be surprised to see how much wasted time there is with vendors agreeing a price and then waiting 4 weeks to instruct AND PAY their solicitor.
- Use a legal 500 solicitor, pay the extra money for speed and better communication. It makes the difference!
Can an area have too many rental properties? Should i buy somewhere quieter?
I like to answer this question. It stems from our very human emotional reaction to competition. The mindset is based around the desire to be the only rental property in that little area, and so if someone wants to live there, or more than one person wants to live there, there will be less competition. This strategy isn’t effective though. Going where there is less competition is an indicator that there is less demand. Put yourself in the shoes of a renter. Would you prefer to live close to ameneties, or a walk away from ameneties? Only some will want the latter, and it’s usually due to budget. Demand is high in areas with good schools, shops, entertainment, green spaces. Focus your energy not on finding areas with less competition, but on being the best property in the area of high demand. If you have good quality housing stock in your portfolio, close to all of the places any human being needs, you take care of your property and it’s presented nicely, you wont struggle to rent it. Whether there is excess supply in a market or not, if your property is priced and presented well, you wont struggle to rent. Believe in your product, look after your property and your tenant and focus on being the best option, not the only option.
What is guaranteed rent? And will they damage my property?
Guaranteed rent comes in a few shapes and sizes. Mostly it it Local Housing Associations leasing property from private landlords for a period of 5 or 10 years, with a monthly payment to the landlord, regardless of whether the property is being used or not. Due to demand for this type of housing, and lots of landlords unwilling to cede control of their asset to a third party, rent prices can be higher.
Be careful though, as not every guaranteed rent is this format. A lot of new property investors also offer a guaranteed rent scheme. They will offer a below market rate rent, lease the property from you for 5 years or so, and find a tenant that is willing to rent from them for more than they pay you. They also promise to pay the maintenance. In reality, this is incredibly high risk. Usually, these types of offers come from inexperienced amateurs, with no collateral, nothing to fall back on if the tenant stops paying. The company will likely be asset light and so if they owe you 6 months worth of payments due to a tenant not paying up or the property being empty, they just fold he company and disappear. Look into any company offering you a guaranteed rent, check them out on company’s house and ask around.
Will they damage your property? I can only speak from personal experience. I have been in A LOT of properties on a guaranteed rent scheme that has come to an end. Although the contract they have with the Landlord states they will return it to the condition it was in before the lease, usually the damage is quite a lot, especially in the HMO sector. Tenants vary, you may get good ones, you may not. If you just want the money, it’s a good option. Personally, as a control freak, i would pass on it and take on the responsibility myself of getting good rents, but every investor is different and there is a lot of profit in this strategy to match the risk.
What documentation do i need to provide at the start of the transaction for AML?
In short, as an overseas buyer you will need to provide us with:
Proof of ID – Passport, Copied and certified by a local solicitor.
Proof of Address – Bank Statement or Utility Bill showing your address, also certified in the same way
You will also need to be prepared to answer questions regarding your proof of funds so that we can complete a risk assessment. One thing we are seeing more recently, is the documentation needing to be sent directly from the solicitor to the agent, and also that the wording needs to be an exact phrase as dictated by an agents internal compliance. There are also some applications that will certify your documentation for you so as to not have to go to a local solicitor, which can be expensive. Whether that comply’s with the agents AML procedure is down to each agent individually, and based on their own interpretation and risk assessment…as well as the risk category of your home country.
My survey came back and the property has lots of Level-3 Items. Should i still buy it?
I speak from personal experience only, and this isn’t advice…
Surveyors are very skilled and experienced. After the 2008 crash, a lot of the banks leant on the survey companies and basically called them out for overvaluing the property and just agreeing with the valuation the agent told the surveyor. This resulted in a lot of them getting sued and going out of business. Fast forward a decade or so and surveyors in the midst of the Covid price spike are acting with a hell of a lot more caution. It seems the strategy is to mark anything even resembling a risk as a level 3 and advise the client to do more investigations, while valuing the property using old sale prices. Granted, this is the accepted technique of valuing, and for good reason, but, it certainly makes for a difficult job to understand what is being said in a survey report when a lot of ar** covering is going on.
So what to do if there are a lot of level 3’s? Honestly, sometimes, it’s a good thing. If a survey reads badly, it doesn’t necessarily mean it is bad, it just means that the surveyor cant guarantee it’s good. Discounts can be heavy, so before you walk away, this can be an opportunity. If there are issues with damp, it depends on the extent to which damp is present, and where, for example. But on the whole, Victorian 3 bed semi’s in the north of England all have damp, so as long as the property is well ventilated and the timbers are in good order, you’re likely fine. However, you can easily grab yourself a £5k discount and a better deal. Same goes with roof work. I bought a house that had a collapsed ceiling. Turns out there was a tile missing. £1k of work, £9k discount.
In short, speak to someone who knows. Speak tot he surveyor directly as well. They are so knowledgeable and, if you can get them off the record, they can give you so much good insight!… Putting their name to it though is a different story, so learn to read through the caution and it will become a great negotiating tool.
What do tenants look for in a property since Covid?
Widely, the same as before, but with limited stock and more demand for these properties, we are seeing prices rise dramatically for the properties that tenants want. Flats are out, houses are in, and the more green space the better. But theres one added feature that’s adds the cherry on top.
There is certainly a bonus for a garden, more so since the pandemic and for obvious reasons. 3 Bedroom properties are in high demand also for obvious reasons, with more people needing a space to work from home. However, the biggest price rises are for the ‘shiny properties’. There has always been a premium for properties in good condition. But, since the end of last year, there seems to be (in both the sales and rental markets) an additional rise for the well presented properties in addition to the expected rise. Why? I think this is due to tenants working from home and wanting not just a nice space, but a really nice space to work from, as well as on show in the back of their zoom calls. A nice feature wall, good quality flooring, all brand new and shiny seems to be achieving an extra added bonus. To put some numbers to it, a 2 bed in one area we invest in the North East near Liverpool was always £525 as a ceiling price. After a refurbishment, the property rented for more than £600.
Additional factors will come into play also, in that the nation has more money in its bank accounts than ever before, with people saving due to lockdowns, and so having more money to spend now. This factor is also helping First Time Buyers boost the housing price as they compete to purchase properties while they have savings and grab their chance to get on the property ladder. But in short, if you are renting a property to a tenant and want the best value, it’s more worth it than ever to do some work… Careful of rising cost of materials though…
The house i'm buying has damp! What do i do?
Damp comes in a few forms.
- Rising Damp – Which comes from moisture in the ground, rising up through the brickwork over time through hydrostatic pressure.
- Penetrative Damp – Which is when rainwater or standing water impacts against the surface experiencing damp and soaks in a bit at a time
- Moisture in the air will also cause damp, for example if a bathroom isnt correctly ventilated, steam from a shower will soak into the plaster and cause black mould.
So it depends what you have, how extensive it is, and what options you have available.
The first thing to understand is that just because a wall has high levels of damp, it doesn’t mean that in the real world there is a chronic issue with the house that will negatively affect your investment. Victorian houses were built over a hundred years ago, so they likely aren’t going anywhere anytime soon as it’s probably been like that for a century already.
Next, we need to assess the secondary effect, which are what will be able to be seen and experienced by an occupant in the property. Also these are the bits that cost the money to deal with. If the rising damp has rotted timbers in the floor, there is a problem, and this will eventually cause the floor to fall in if left without remedy. Excessive creaking and ‘bouncing’ of the floor is a giveaway that the timbers have deformed, and if there is damp in that wall, it’s a dead giveaway. In a case like this, discount or walk away.
However, if there is damp in the walls, the plaster is not bubbling or flaking, the property has a fresh clean smell even in winter when the windows are closed and there is no black mould anywhere, the chances are that the property is completely fine. By ventilating and warming the property, a lot of issues can be managed effectively. Just think about when you paint a room, you leave the windows open for the paint to dry… the walls are the same.
The last thing to not on damp, that is commonly forgotten, is that not all Damp Proof Courses are effective. If a wall is plastered below the line that the DPC has been installed, moisture can soak into the plaster, rise up the wall (over month/years) and cause the plaster to blow anyway. That wall will then experience a worse effect than before. So care must be taken when dealing with damp that the reasoning is understood, and the remedy is suitable.
The main things to look for damp, isnt whether the property has or hasn’t got damp, but the extent to which it is manageable. If there is damp in the walls but the timbers are completely fine, consider reducing the price anyway just as a matter of course, and then make sure the property is warm and well ventilated. In my experience with my ‘Bills Included’ tenancy’s, where having the boiler on max and all of the windows open is the custom, the property will likely be fine.
If in doubt, a Timber and Damp survey costs about £300 and will more accurately assess the extent of the issue than a Home Buyers Survey. We can recommend you a good one if needed.
What do i need to do for Landlord Compliance?
Before you rent your property, you will need to address compliance. Being compliant is a Landlords responsibility, and you as the landlord, regardless of whether you have a fully managed service or not are responsible legally for the tenancy and the compliance. So what do you need to be compliant as a landlord?
- Provide a Tenancy agreement – Normally an AST. Examples can be downloaded through the NRLA, from your managing agent, or we can give you one!
- Deposit protected in a scheme – DPS (Deposit Protection Scheme) or MyDeposits are the ones we have used. Deposit must be stored within 30 days of receiving it if using the custodial scheme.
- How to rent guide issued before the start of the tenancy. This is a document that became Law to issue before the start of a tenancy back in 2015.
- Electrical Installation Condition Report (EICR) -This costs around £220 and lasts 5 years.
- Landlord Gas Safety Certificate -This costs around £90 and lasts 12 months.
- Energy Performance Certificate -This is now Law to have an in-date EPC when selling, so you should have one if you are buying a property already in your legal pack, and they last 10 years. You will need to have an EPC of E or above to be valid.
- Property Inventory – The letting agent will document the condition of the property and take photos at the start of the tenancy.
- Complete the Non-Resident Landlord (NRL1) form – This is for overseas investors, including Hong Kong Investors, living outside the UK. You must complete this form in order to tell HMRC you are collecting rent so you can be taxed.
How to find an area to invest in for HMO
We take data from a whole heap of government sources: Rightmove, population data, employment data, and a whole myriad of other sources to build a picture of every postcode in the country, not just Kent.
We have a strict set of criteria we adhere to regarding the number of people in each region, the type of housing stock (size and number of bedrooms), the number of houses in that category, employment vs unemployment, the occupation slice of that postcode, average wage, the number of people of working age in that postcode…the list goes on and on.
In order to find the best returns, it is essential to first decide what it is you want to achieve, how hands-on you want to be, and whether there is a market for what you want in that area… In short, there’s no point ‘ self-managing’ an HMO in the Lake District if you don’t drive, have a full-time job and there are only 5000 people in the area, 45% of whom are over 64 or under 16 and wouldn’t live in an HMO (typically)…even if it is cheap.
We could find another strategy in this situation, but that’s not what you came for originally. We can help you find your ideal area, pick your ideal tenant, price your ideal refurbishment, and can even find you a property.
Request our Kent Investment Overview Sheet to find out more about Property investing in Kent.
How can I find a property in Kent to turn into an HMO?
The first thing you need to figure out, is why you want to invest? Is it for cashflow? Or capital growth? Are you in it to replace your income, or to give yourself a pension pot? This will affect the strategies most likely to give you what you want and the more clear your vision, the less likely you are to make a wrong move…
From that point, it’s a case of looking at the housing stock available in the areas that work best for you (size is very important), choosing your ideal tenant so you can plan your refurbishment based on how much that person typically pays, and then stacking the deals available. How many bedrooms? 5-6-7? Will you need planning or is it in an A4 area? How much does your ideal tenant earn and how secure is their job in the current climate? What sector do they work in and are they transient? How much do you have to spend on a refurbishment to attract them? Finding a property is simple…but finding a great HMO investment is difficult.
The best deals are usually off-market, direct to vendor. Contact us for more info and to find out how we go the extra mile to get the extra returns.
How can I get off-market deals in Kent?
Use a combination of techniques, and there are a lot! We use direct mailing campaigns, social media, data scraping software, our network of property sourcer’s, and the fact that agents come to us with properties before they hit the market.
Sourcing is a really time-consuming part of the job. We spend a lot of time on the phone or visiting properties, putting in offers, stacking and restacking deals as the market changes, to make sure that once the property is under contract, we are getting a deal…
But why do that all yourself, when we have done it for you?
Where can I get a 360 virtual tour in Kent?
Three Oak Property offers Matterport virtual tours to all landlords and investors looking to future proof their investment.
As a company, we pride ourselves on using the best, most modern, and most future-proof ways to market your property and design your refurbishment. We use the market leader, Matterport, to keep your property standing out online while looking for tenants. We offer Virtual Tours in Kent and SE London to all landlords, looking to keep their tenants safer during lockdown periods through reduced contact.
With our ‘Remote-Ready’ aim for all of our properties from 2020, we use virtual tours as a cornerstone in providing excellent service in lettings but also keeping all of our staff and tenants happy and safe in these difficult times.
How much is a Virtual Tour?
Matterport Virtual Tours are £250. As we own our own equipment, you don’t pay a mark-up as you might with an estate agent. Once we have the model, we can also help you refurbish completely remotely should you need us to. As we are an investment company, we can look after the maintenance of the property AND take over your lettings, should you wish to keep everything in-house.
We offer preferential rates to all of our clients on refurbishment project management and sourcing, whilst offering competitive and cost price offerings on lettings…
How can I find new tenants Kent?
Is the marketing of your property good enough? If your closest competitor has a contactless new tenant onboarding system and is Remote-Ready, and you don’t, is that making the difference?
Virtual tours, remote key-safes, online marketing, digital signatures on tenancy agreements all help to keep you and your tenants safer and give you the edge… They free up your time as well, which allows you the freedom to do the things you love. We use all of these techniques, and only charge what they cost, in order to make your property ‘Remote-Ready’, which is a huge feature of our strategy of investing into 2021.
Not only will this be a benefit in the Covid-19 pandemic, but, depending on your strategy, will allow you to take a back seat if one day you wish to step back from managing your own properties