Hands-Free Property Investing Explained
Hands-Free Property Investing Explained
Here at Nichol Smith Investments, we offer hands-free investing for our clients. But what do we mean by hands-free? This article will talk you through exactly what we do as a property investment company.
Firstly we’ll source a property for you that matches your investment criteria, for example, a two to three-bed property with an estimated value of £130,000 to £160,000. We aim to find you a property at below market value. This ensures our clients make money when they buy.
Next, we’ll carry out any necessary works to the property ensuring a high standard of finish and optimise the rental value of the property. We manage this process on your behalf meaning no hassle for you or time commitment required. This means we have added value to our client’s property. We often recommend refinancing the property after a set period of time, normally 6 months, to the higher valuation, allowing clients to pull out some of the money they initially invested in the property.
We then hand the property over to a trusted letting agent to manage the property thereafter. They will ensure a tenant is vetted before the tenancy starts and will take care of any maintenance issues with the property on an on-going basis.
We provide a first-class service to ensure our clients reinvest with us year after year. Although we offer a portfolio building service for our clients, we also offer another property service. If clients don’t want to own property themselves but do want to invest their money in property, we can offer a fixed return on their investment annually.
If you’re interested in investing in property but would like to discuss your situation further, click the button below to book a call with me.
Property Staging: Everything You Need to Know
Property Staging: Everything You Need to Know
Property Staging is a relatively new concept in the UK, but our counterparts over the pond have been staging homes for years. This article aims to highlight some of the benefits of staging your home for sale or let.
Home staging, also known as property styling or property presentation, is preparing a home to looks its best. Usually, the aim of making a property look top-notch is to help it sell fast and for the best possible price. Sometimes homes that look great on the outside can sit on the market for months on end with little interest, but staging can go a long way in getting a lot of bang for your buck.
According to UK property analysts, mouseprice.com, homes that have been staged before selling can fetch up to 10-15% more than the competition. That doesn’t always mean investing more money on your home before putting it on the market; it can be as simple as decluttering and being smart about your choice of decor – if you have the time and ability something is always better than nothing.
If you don’t have the budget, you can still spend some time and effort making your home look its best. Clearing any clutter will allow the buyer to easily envision themselves living there. Try and tidy all non-essential items away into storage, whether that be an attic, garage or storage unit. Ensure any minor DIY repairs take place before viewers come round, like fixing any leaky taps or repairing any dents/scuffs in walls. This limits the number of jobs a buyer will feel they need to do when they move in. Give your home a deep clean if you can to ensure buyers attention is not drawn away from your beautiful home. In terms of decor, do your best to lighten your home for viewings. A few strategic lamps can help make your home feel bright and homely. Last but by no means least the area outside your home. Tidy this as best as you can, and if possible, make sure windows are cleaned, freshen up or replace any potted plants, and grab yourself a new doormat. First impressions are vital!
If this sounds like too much work, call in the professionals. We have used professional property stagers in the past for properties we were putting on the market, and they are worth their weight in gold. Not only will they save you a massive amount of hassle, but they will also make your home look fantastic. Property staging companies will discuss your needs, for example, requirements for furniture, and will often visit your home before providing a quote for their service.
Property stagers will bring everything from beds to lamps, to throws, to pictures to make your home look dreamy. Stagers tend to be qualified interior design experts, but they also rent you furniture and home accessories perfect for your home. You’ll not own any of the items they bring to your home; you will just rent them for a specified period of time. Often stagers will leave their furnishings with you for as long as you need them, typically 8-12 weeks. Some can provide you with furnishings for your professional photos only; therefore a top tip is to check the rental period with them when discussing your quote.
In terms of cost, this will vary hugely depending on your individual needs. The number of rooms, soft furnishings required, and pieces of furniture needed will all affect the cost of the service. Also, the timeframe may come in to play. Deciding how long you need to rent the furnishings for and how soon you require their services will also play a part in cost.
Do we think it’s value for money? We would always recommend thinking about the cost of staging your property versus the risk of not staging your home. If you know it will help your home sell quicker, it should be factored in as an essential cost of moving home. In terms of achieving a higher sale price, we personally do not think anyone could ever be certain exactly how much value it could add to your home during the sale process. You will definitely attract more buyers to come and view your home, and that’s always a good thing when you’re looking to sell.
Click the button below to book a call and find out how we can help you on your property journey.
Investing in Property: Why is Now the Best Time?
Investing in Property: Why is Now the Best Time?
We get asked this question often. Why do we still invest in property? Why should we invest in property?
We always answer these questions with the same answer. Look at some of the richest individuals in the world, and they’ll have made their money through property or invested in property as their investment vehicle of choice. And it’s the same reason we invest in property personally. We see property as a safe place to invest our wealth long term in comparison to other investment methods.
Many individuals ask why now? Why is now a good time to invest in property? We are going to summarise why we think now is an excellent time to get into property.
The population is growing. More people means more homes are required. Demand for property has never been higher.
We have seen a shift to renting long term. The younger generation favours renting; whether that’s to allow them the freedom to follow their career or to go travelling. Many young professionals cannot afford to buy a property.
Leverage. When you buy a property, you only need to put down a deposit; therefore for every £1 you put in, you can borrow 3 times this from the bank. This is important when we look at capital growth over time, as you benefit capital growth on the total property price rather than just growth of the equity you hold in the property.
Make money when you buy. If you can secure a property below market value, you are technically making money when you buy the property.
Timing: no matter what the market is doing, so long as you buy smart, you should get into property now. There will always be political issues, crashes in the market etc. So long as you are prepared to hold property long term, you will grow your wealth regardless of when you get into the market.
Tax changes (Section 24). The Government brought in a new law last year, that meant that anyone with rental properties would no longer be able to claim their mortgage payments as a tax-deductible expense. Many landlords are realising their rental properties are costing them money, and are keen to sell them quickly and for a low price.
Pensions. Many people are starting to realise their pensions are not going to allow them to live the life they’ve dreamed of, let alone cover their current costs of living. Property can be used to create passive income for retirement, and many of our clients are in property specifically for retirement income. If you are self-employed or have a limited company, you could use your pension fund (via a SSAS pension type) to build your property portfolio. We have a video on our youtube channel explaining the benefits of SSAS pensions in property and I’ll link to it at the end of this video.
Finally, savings accounts. We’ve had so many clients reaching out to us to start their property journey with £50K+ in their savings accounts. These savings accounts might make them 2% annually. Imagine if you could get a 4% net yield year on year, not to mention capital growth over time. It’s really a no-brainer – get your money to work harder for you!
We hope this article has been useful in highlighting why now is the best time to invest in property. The benefits are life-changing.
Click the link below to book a call and find out how we can help you on your property journey.
Repairs: What Can Make or Break a Deal?
Repairs: What Can Make or Break a Deal?
Knowing when to walk away from a potential investment property because of unforeseen problems can be a tough pill to swallow. A property may be in the perfect location to add to your portfolio, but if an expensive repair comes along, we need to decide whether it will make or break the deal.
When looking for an investment property, crunching the numbers is vital to making a property profitable or not. Everything comes down to cost. If we make an offer on a property before costing up a specialist repair, we could end up out of pocket rather than cash flowing.
When looking to buy a property for our clients, we have to be very aware of certain repairs which may make or break a deal, for example, damp, asbestos, roof damage or structural issues. If we suspect any of the problems previously mentioned, we call in an expert for advice. Some specialist repairs can be surprisingly low on cost and inconvenience when compared to others.
This can separate us from the average investor, who may run a mile when something like dry rot is mentioned. We always instruct a trusted professional to come in and quote for a job before making an offer on a property – that way; we have peace of mind that no stone has been left unturned.
Having a quote to rectify a specific problem can be used during the negotiation process. For example, if a property has dry rot, we would make an offer on the property minus the cost and time delay to complete the necessary work. That way the seller knows exactly why an offer has come in slightly lower than anticipated (or previously discussed) and we have a quote for the necessary work from a trusted professional.
Sometimes the defect isn’t nearly as costly as first feared. According to figures from the Building Cost Information Service and the Royal Institution of Chartered Surveyors, the cost of eliminating damp from one wall of a terraced house can be as little as £204.
There is, however, a big difference between dampness in one wall of a house and rising damp that affects the whole house. This can cost tens of thousands of pounds. And dampness is often not the highest cost repair. Japanese knotweed can be extremely costly, and from our experience, would tend to be a deal-breaker as you cannot eliminate the infestation (you can only control it).
Asbestos can be a costly house repair that many fear being found in their property. Asbestos presents a health hazard to all occupants, but only if it is disturbed. The safest course of action is to hire a licensed contractor to remove it. Asbestos can be found throughout the home and can be found in insulation, fire retardants, ceiling and floor tiles.
Once a specialist repair has been quoted for, we can start the negotiation process. For many individuals, this process will involve speaking with the seller’s estate agent or solicitor. We always try and talk to the seller themselves, to allow for transparency with an offer on their property and reasoning behind the offer made. We find this is the best way to work, but it may not be possible. This is where we need to remove emotion from the property buying process. If the seller is not happy with an offer, and we cannot secure the property for a price that works with our budget, a deal is not made.
If you’re interested in investing in property but don’t have the time, knowledge or know-how, click the link below to book a call with me.
Property Type: Which Property Type is the Best Investment?
Property Type: Which Property Type is the Best Investment?
Most investors will have different opinions on the ‘house vs flats’ debate.
Often the group that prefers to invest in houses believe this as they don’t want to pay service charges and they feel they don’t have control negotiating maintenance costs. Additionally, they may not like the proximity of the other tenants in the building.
Then you have the other side of the argument, the group that assumes flats are superior investments as they often offer higher profit margins due to lower sale prices and they have less upkeep to organise as a factor takes care of all external works.
Having invested in both types of properties, we have created the lists below to outline some of the pros and cons of each as investment opportunities. As ever, you will have your requirements to consider in addition to these. We have created this as a guide to help you get started.
Pros when investing in flats:
- Traditionally flats have lower sale prices than comparable houses
- Different lifestyle trends may show that renting flats is a popular option for younger people or people without children
- Often they deliver higher cash returns and yields
- Maintenance fees are split between all the tenants, and usually, the managing agent or factor will undertake organising the works
- Quality flats can sometimes be secured for around two-thirds of the price of a house
- As flats are often cheaper, you can buy more of them, and it can be quicker to increase your property portfolio
- It is possible to spread your risk across more properties which will reduce the effect of a property being untenanted (if the rent is not guaranteed through a letting agent)
- Buy in bulk, and you may receive higher discounts, and avoid stamp duty in Scotland (6 or more properties bought at one time)
- Demand in urban areas can increase prices
- Can easily add an extra bedroom if the flat has a separate kitchen by combining the kitchen and living room
Cons when investing in flats:
- They could have high service charges
- Sometimes they can have cramped living spaces
- Difficult to qualify for financing on certain types of apartments and LTVs can make leaders see flats as higher risk
- Fewer renovation opportunities – reduced ability to extend, convert the loft or add an extension
- Flats in large blocks are very similar, and therefore there is less wow factor
- Frequent tenant changes
- Some maintenance costs may not be obvious, and this can result in unexpected costs cutting into your profits
- High-rise buildings are often slower to return capital, and high-rise council buildings can sometimes be unmortgageable
- It might not be possible to change the property to an HMO (which will help you avoid empty properties and can increase cashflow)
Pros when investing in houses for buy-to-let:
- There are more options for development, conversion or even extensions which can add value for reselling or remortgaging
- No additional costs for maintaining common areas
- Buyers and tenants get a greater feeling of space and privacy
- Tenants more likely to stay on a long term basis as families tend to commit to properties and will often maintain them
- The potential for capital growth is much higher
- There’s scope to convert a more substantial house into multiple flats which can be leased, remortgaged or sold
- Houses have a broader target market as they attract property investors, developers, first-time buyers and families
Cons when investing in houses for buy-to-let:
- Initial costs are normally higher
- Could have a garden area to maintain
- Interest and stamp duty rates will be greater
- Families with children can result in more damage to the property
- Maintenance can be pricey given the extra size of such properties
- Cash flow is more of a potential risk with the yield of the property being lower
- Vandalism and theft are more likely with houses if left empty
The pros and cons of purchasing flats or houses are clear to see.
Which type of investment is right for you?
No answer is correct in this scenario. The question that investors should ask themselves is “What return on investment am I trying to achieve and which property type will help me to do this?”. So long as they have a high yield, both flats and houses are reliable investment options, and neither should be ruled out when making the decision to invest.
If you would like to find out more about how Nichol Smith Investments could help you reach your property goals, click the button below to book a call with us.
Which Location Should I Invest in Property?
Which Location Should I Invest in Property?
Location, location, location: Which location should I invest in property?
When getting started in property investment, you may find yourself asking, ‘where should I invest?’ and we always recommend the best place to start is your local area. While I still advise you speak with local Estate Agents to find out about the property market in a specific area, we have to remember that estate agents will likely try and convince you their area is great, as you are looking to buy a property and they are trying to sell a property. We advise when starting out to stick with the area local to you that you know well. That way, you know how quickly homes are selling and the areas to potentially avoid.
We would advise you to buy a map of your local area and start looking online at homes for sale. You will find that similar properties come on the market regularly in specific areas, for roughly the same price and the same condition. You can then use the same mortgage provider, solicitors etc. to secure the properties. This creates a predictable and scalable system for you.
It is easy to get caught up in the hype of locations and be tempted into buying in a nicer area at a higher price because it seems like a sensible approach, but in practice, this is the opposite of what works when you are trying to create a sustainable and cash flowing investment portfolio. If you bought properties all around the UK, then you’d need more hours than are in a day to be able to make this work, not to mention your social life would be non-existent. We would recommend investing in a small area locally and grow this area slowly over time.
Apart from living in a rural sparsely populated area or an expensive city, the answer to “where should I invest?” should always be in your “local area” albeit in the slightly lower-end suburban area. This will increase your chances of success over time which will keep the cash flowing.
Every location has its advantages and disadvantages. So long as you understand the pro’s and con’s of an area and develop a level of knowledge other investors don’t have, you will make money where they haven’t been able to.
Finding Trustworthy Tradespeople
Finding Trustworthy Tradespeople
We all need to relay on tradespeople from time to time, but not all tradespeople provide the same level of service as others. Finding trustworthy tradespeople is possible, but spotting cowboy builders or plumbers can be tricky. Follow our top tips to find the best tradespeople and protect yourself from a costly mistake.
Word of mouth
A personal recommendation is always preferable to a written reference. Ideally, a tradesperson that has been recommended by a friend or a neighbour should be trustworthy, particularly if you can ask the individual about the work ethic of the tradesperson and satisfaction of the finished product.
Quotations
We always recommend getting at least three quotes for works required, which should be detailed to ensure each tradesperson quoting knows precisely what the job entails and finish needed. Usually, we would not recommend going with the tradesperson who has quoted the lowest price, as this can occasionally indicate a lower quality job or finish. If the quotes seem very high, trust your gut feeling and get another quote. If you get a bad feeling about a tradesperson, chances are you should trust your instinct, even if the price seems competitive.
Traceability
Ensure any quote received is written formally with a proper business address. Some cowboys like to hide their traces, whereas reputable tradespeople are open and above board.
Bigger projects
When it comes to choosing a company to carry out larger scale building works, companies with more than ten years of experience will tend to charge a premium. Bear in mind a younger company may need to outsource specific tasks to other professionals such as gas/electricity, which can sometimes impact the quality of work.
Specialist works
Some homes require additional experience when it comes to renovations. Buildings that are listed or period homes, or homes in Conservation areas, will require a builder with more experience. Check that the company you are considering for your project have the necessary experience or examples of previous work on these types of properties if your home falls into one of these specialised areas.
Local vs national
We always consider time when choosing a company to carry out work. If a tradesperson is local, this can be an advantage over another tradesperson who needs to travel miles to get to you. They will likely inflate your price to cover time and fuel required to get to you for the duration of the project.
Requests for cash
Always be wary of tradespeople offering a discount if you pay in cash. Occasionally these individuals may cut corners with other vital things like guarantees and insurance. If the tradesperson asks for cash, count this as a warning flag.
Contracts
For larger projects, it is very important to have a signed contract that includes full details of all work involved, but also a start and finish date. Unforeseen delays can occur at any point throughout the project, so having a start and finish date can help keep tradespeople on track and when necessary, be used to protect you from a never-ending project. Also, confirm with the tradespeople where they will dispose of builders waste and the standard you expect the property to be left once work is completed.
Payment schedule
Always have a clear outline in your signed contract with your tradesperson detailing payment. We often advise a system of paying in thirds. Ideally, pay a third of the total cost upfront and agree on a date or mid-way point during the project to pay the second third of the total cost of the job. The final third of payment should only be paid once the job is completed, any snagging issues sorted, and the work has been carried out to your satisfaction. Put any changes to the payment plan in an email to the tradesperson detailing why a payment has not been made, to ensure there is a legal paper trail in case of disputes.
Insurance
Check both your home insurance and the insurance of the tradesperson chosen to complete the work to ensure you are covered in case of any unforeseen problems.
We hope you have found this blog helpful when considering tradespeople for your next project. Here at Nichol Smith Investments, we offer hands-free investing in property. We oversee all work involved in property, from full refurbs, extensions to small renovations, on behalf of our clients. If you’re interested in investing in property but don’t have the time, knowledge or know-how, click the button below to book a call with us.
Sell or Let Your Home Fast: Our Top Tips
Sell or Let Your Home Fast: Our Top Tips
Anyone looking to sell or let their home knows it can be a lengthy process. From our experience in property, certain things can get you an offer on your house quickly.
Selling or letting a property can seem like a daunting task, but it doesn’t have to be this way if thought is given to the simple things.
First impressions
First impressions are crucial and could potentially make or break getting an offer on your property. Take a step back and think about what you, as a buyer, would be looking for when viewing a property. Viewers will look at everything, top to bottom, side to side. If possible, allow viewers to start in a welcome hallway or feature room, to make that all-important first impression.
Tidy and declutter
It might seem a little obvious, but make sure you have thoroughly tidied your home before photos are taken and viewings commenced. Give it a deep clean and declutter where possible, as a neat and tidy room appears more spacious and therefore more appealing to viewers. A home that needs a good clean can often turn potential buyers away, as your home will not homely to the masses. Gardens, garages and communal hallways (where applicable) should not be overlooked when tidying.
Small but important touches
Have you ever walked into a home and been hit with a wonderful aroma. Coffee brewing, bread baking, and fresh flowers are ideal. These can all appeal subliminally to potential buyers and make them feel at ease. It may seem obvious to mention that odours from pets or laundry will impact potential buyers, so ensure your home is well ventilated and any unwanted aromas dealt with before viewings. During winter months it’s always a great idea to keep your home warm, and even light a candle or two. Allow viewers to get a feel for the peaceful surroundings, keep background noise to a minimum.
Be as flexible as possible with viewings
While selling or letting your home can be a lengthy process, try to accommodate viewings where possible. Your property will only sell or let to individuals who have managed to view your property, therefore the more people who come to see your home, the more likely you are to receive offers. Some estate agents and letting agents can help with viewings if you are unavailable to show a viewer round your home, which is a huge benefit of using local agents rather than online agents.
You may be asked some difficult questions during the viewings, remember to be honest and polite no matter the question. You will know your home and local area better than anyone else, so don’t forget to drop in things you love about your home and neighbourhood, to help viewers in their decision making.
‘For Sale’ or ‘To Let’ signs must always be displayed prominently and checked regularly, to ensure they are upright and facing the correct direction for maximum impact.
Experience is invaluable
We always advise our clients to consider using an experienced local estate or letting agent. The years of experience they have with handling potential buyers is invaluable and can make this process far less stressful, particularly if you are struggling to organise viewings and dealing with a high level of interest. Using a local expert can make all the difference in achieving the successful sale/letting of your home.
If you would like assistance in selling your home, please get in touch with Nichol Smith Investments on 0131 322 1442. We have a team of experts who can guide you through the process of selling or letting your home.
Are You Thinking of Downsizing?
Are you thinking of downsizing? We have put together some tips to help make the process easier.
Clear vision – We always advise clients who are downsizing to be clear in their mind why they are downsizing. It can be easy to get sidetracked or lose momentum when you’ve decided to downsize, so having a clear vision of why you are downsizing can help keep you on track. People downsize for many reasons: children have left home, and the property is now too big; release equity for retirement; the passing of a loved one; or moving to the dream location. Whatever your reason for downsizing, you’ve made the decision, and it’s now time to take action.
Planning is vital – Planning is essential when it comes to downsizing. Even the smallest of tasks will take you longer than you think. Getting all your possessions packed into boxes can be a real chore, but if started in advance, can be a much more manageable task. We advise our clients to picture where each item of furniture will go in their new home and pack boxes with their new rooms in mind. Even if you don’t have the time to think of each room in your new home and where each piece of furniture or picture will go, clearly labelled boxes go a long way to help unpack at the other end. Some removal companies can help you with this task if you are not able to pack items yourself.
Be realistic – Too many clients pack up and take everything with them with the false illusion they will sift and sort through items at the other end. Think of downsizing as your chance to have a spring clean. Focus on precisely what you need in your new home, and this will make the process easier. Some of your favourite pieces of furniture may look out of place in your new home, particularly larger items, so think carefully about which items you take with you. The more sorting and clearing you do now, the easier it will be to settle into your new home.
Maximise space available – Although you are downsizing, it is still advisable to think about each room in your new home and ensure it is being used to its best potential. Often if a house has been occupied for some time, the owners may have used a bedroom for storage or a study. Making the best use of each room in your home will help you settle in.
Set up your utilities – Utilities such as phone and broadband can take a few weeks to come through when you move into a new home. Check with your estate agent or the property questionnaire (Scotland) to find out which providers were used by the previous owners. Giving previous providers a call may be the easiest and quickest way to have utilities set up at your new home. Don’t forget to let your current utility providers know that you are moving home.
Seek help from professionals – A local professional is usually the best person to contact to get the most up-to-date information on moving home. A professional agent can be invaluable during the moving process. Removal companies can be worth their weight in gold for packing your belongings, freeing you up to deal with other tasks.
We hope you have found this guide helpful when considering downsizing. We currently offer a bespoke service for downsizing in Edinburgh. If you would like to hear more, please call us on 0131 322 1442.
Five Tips for Success at a Property Auction
Five tips for success at a property auction
In this article, we are going to give you five tips for being successful when buying a property at auction.
How to buy a property at auction?
Auctions are one of the few places that offer the opportunity to find profitable commercial or residential bargains. They come with a considerable amount of benefits for a property investor – they provide quick sales, a relatively simple buying process and the certainty of your purchase.
Traditionally, bidders at property auctions were regular investors, whereas now there are more and more first-time buyers and entrepreneurs contemplating buying properties at auction, with many individuals keen to find out more about the process. The atmosphere at an auction is unmistakable and not just because of the property investment opportunities. There is the excitement of bidding, the unknown of whether or not you’ll be successful, and the buzz of competing with other investors.
However, it’s not all fun and games, mainly if you are underprepared, because there is a good chance you could overspend, buy a property not worthy of investment or feel rushed into a decision you aren’t comfortable with. Before diving in headfirst to a bidding war, we recommend following our five top tips for success at property auctions below.
1. Set a maximum bid amount and stick to it
This may seem like an obvious one, but when you get caught up in the excitement of a bidding war, it can be easy to lose sight of your top-line budget. Make sure you stick to your maximum at all times, even if you get caught in a head-to-head bidding war. It is better to lose the bid than overpay for a property that could cost you in the long-run. Generally, properties sell above their guide price. These prices are there to indicate the minimum expected price at the end of the action. With that being said, if you are drawn into a bidding war, this can be the difference between making thousands on a sensible purchase compared with spending more than you ever intended on a property which will impact your profits, sometimes causing them to go into the negative.
To avoid this as much as possible we recommend you research each property lot, do some simple budget plans and then set a maximum budget for each property, so you are not tempted to go over-budget.
What’s the advantage of doing this? A lot of the other attendees will not have the foresight to set a maximum for each property lot. By establishing yourself clear limits, you almost guarantee profits from any purchase you make.
2. Check out the property before bidding
Low auction property prices are always tempting, but generally speaking, there is always a good reason for the lower price point. Huge renovations are often required to make these cheaper properties habitable – sometimes involving structural alterations or reinforcements. For this reason, visiting the property in advance, and getting quotes and advice from experts is essential.
Going to see the property will give you an insight into the area and the types of people that may want to rent or buy the property from you. It happens far too often; people buy a property only to find it had a low price point because there is a lack of buyer/renter interest or it is in an unfavourable location.
Organising a surveyor or knowledgeable builder to accompany you to a viewing will give you a better idea of the work required to make the property rentable or sellable. A lot of the available properties will be in poor condition and will require time and effort to bring back to a liveable state. If you are looking to move in, rent or sell quickly, then you may wish to reconsider buying a property from an auction. By bringing a builder or surveyor, you will be able to compare what is being said about the property in the auction materials with the reality, giving you peace of mind that what is being officially reported is legitimate. Additionally, you should be able to get an idea of the costs involved to renovate.
If the appropriate documentation is not available for the property before the auction takes place, you may consider contacting the vendor’s solicitor. It is important to remember that you, as the prospective buyer, are expected to have full knowledge of the documentation and the facts. Neither the seller or the auctioneer will be liable for any subsequent problems.
What’s the advantage? Some people will go to an auction having never looked at the catalogue of lots while others may have put in the bare minimum amount of research. This can turn bidding on well-researched properties into a game of roulette with hundreds or thousands of pounds being at stake.
3. Make sure you have the money
Again, this may seem like another obvious one, but you need to consider how quickly an auction sale will complete and make sure you have the funds in place. Inexperienced investors can sometimes be shocked at the speed everything goes through and will occasionally find themselves short, trying desperately to pull their funds together in time.
When you successfully win an auction property, you are legally obliged to pay for it and usually you will have to pay 10% of the sale price as a deposit. Then within 14-28 days, you will typically be expected to complete your financing. If for any reason you miss the closing date you risk losing your deposit. It is worth checking with the auctioneer beforehand about how property can be paid for. Make sure you bring your ID along on the day.
Remember the guide price is only there as a reference point. It shows the lowest expected sale price and can change any time before the auction day takes place.
What’s the advantage? You can anticipate how much you can pay for a property which will stop you from wasting time researching a property that you won’t be able to pay for in time. It will also safeguard you against losing thousands if you only put down a deposit for the properties you can afford.
4. Check the legal pack
Don’t get stuck. Do your research and read up on the technicalities of any purchase. Once the hammer drops, there is no going back, so make sure you know the facts. A legal pack will give you all the relevant information for why the property is up for auction, why it might not be possible to go on the general market and any legal issues affecting the building or any reason the property may not be insurable or un-mortgageable etc. The legal pack helps you to understand precisely what you are buying and enables you to ensure the reality doesn’t differ from what may appear to be a bargain. They can also assure you that there are no current tenants and that the property size is what you expect.
The pack should also confirm whether there is a buyer’s premium payable to the auctioneer as well as any survey fees, conveyancing fees and the cost of stamp and duty land tax.
What’s the advantage? Carefully examining the legal packs means you know exactly what you are signing up for if you purchase the property. It may be worth letting a professional look over the legal pack on your behalf, which they may charge you for. If you are serious about buying a particular property, then we advise you factor this into your upfront costs.
5. Don’t forget about Stamp Duty & VAT
Another pitfall for inexperienced investors at property auctions is getting lulled into thinking the bid price is the only payment required. This is not the case!
Make sure you are aware of your responsibilities in terms of Stamp Duty and any potential VAT that will require payment. Understanding this beforehand can work in your favour as being aware of these costs allows you to add it to the list of fees before committing to a purchase. It also means you won’t be caught off guard by unexpected expenses.
Some impressive incentives and tax breaks are available when converting commercial property for residential usage, so it is worth knowing about them. Looking into the flat conversion allowance, it may also be worth checking if you can claim the VAT back for the conversion costs.
Buying a property with a “Transfer of a Going Concern” (a property being sold with a current tenant) may also reduce your VAT costs. As the buyer, you would need to contact HRMC before the date of transfer. This can be slightly complicated by the fact you don’t know if you will be the highest bidder, but if it is possible, then you can save yourself a considerable amount of money.
What’s the advantage? Being prepared for all the finer details when spending at an auction will help you and your bank balance in the long term when you do make a purchase.
As with most things, there are definite advantages and disadvantages when buying property from an auction. It is essential to weigh up the risks and to investigate the property thoroughly, whether it is residential or commercial, before committing to the sale. Research is crucial before making a serious bid as you need to make sure you have the money ready to go within a short time frame; the property is worth the price advertised, and you can make the kind of profit you are looking for on the property. As with all property investment, research is vital.
If you would like to know more about how Nichol Smith Investments could help you with investing in property, click the link below to book a call with us.