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New to property investment

buy to let ninja learning Aug 31, 2018

Question:  

I'm new to purchasing property for investment, I've only ever bought property to live in and, while I've managed to negotiate a small discount here and there, I've never pushed things too hard as I've always really wanted to buy the place (so an emotional rather than subjective mindset).

Now that I'm looking at property as an investment I'm understanding more and more that purchasing at the right price is going to be key to improving my returns and growing a portfolio. Therefore, I'll need to negotiate on price now and then.

Only problem is I don't feel very confident doing it, therefore I'm looking for advice on:

  1. How to locate BMV properties via the standard tools (i.e. Rightmove, Zoopla, Estate agents etc.),
    1. What are the key signs that a property might be available for a discount?
    2. What questions do you ask when enquiring about the property and doing a viewing to dig a little deeper?
  2. Negotiation strategies when purchasing through an estate agent,
    1. Including how to work and word the conversation;

I'm happy to take on a little work on the properties, but I don't think a major refurb would be possible.

Answer:

Confidence comes with your ability to know that you can deliver i.e. you are able to complete the purchase of a property you offer on. Have you checked out that you can get a BTL mortgage and have at least got a Decision In Principle from a BTL lender? Have you got enough cash to cover the likely deposit?

You are right that there is a different mind-set when buying an investment property. If your offer gets declined, as most should if you are doing it correctly, you should have no emotional attachment to it. It works for you at the price you are prepared to pay - or it doesn't.

Relying only on the general market increase in house prices  to add value to the properties you buy will take a long time to increase the value of your property purchases.  You need to achieve an uplift in value quicker by rapidly increasing the value; sometimes referred to as forced appreciation. There are only two ways to do this really:

  1. Buy below the current market value of the property
  2. Add value, usually by means of a refurb 

It seems that you have pretty much ruled out the 2nd as you think it will not be possible to do a major refurb. That is a shame as it is often the properties that need a refurb that are easier to make BMV offers on so, by ruling it out, you are making it much harder to achieve your objective. Often refurbs are referred to as cosmetic i.e. there is no structural work involved.  Refitting the kitchen or bathroom, putting down new flooring and redecoration makes a big difference. Would your definition of a 'major refurb' fit into the cosmetic category?

Another factor is to find the right type of vendor. At any given time there will over 750,000 properties for sale on Rightmove and you can be sure every one of them wants to sell their property, otherwise they would not have listed it. However, a small percentage of them need to sell; they will have a reason specific to them why they don't want to or can’t let the property sit on the market for months on end, it needs to be sold and pretty quickly. This type of vendor will be more motivated to accept an offer below the asking price. Your challenge is to find this type of vendor.

Negotiation strategies depend on how quickly you can buy. Most investors need to get a mortgage and that slows down the speed at which you complete the purchase. If you are in this group of investors, there will be others that can guide you better than I on how to negotiate.

I teach investors how to negotiate when they don't need a mortgage. Not because they have cashm but because they have access to and know how to use short-term finance facilities that enable them to exchange contracts and complete within 4 weeks. This is much faster than mortgage-reliant investors - so they simply can't compete, which reduces the number of potential buyers. When you can complete that fast, you can learn to negotiate with much more confidence.

A key component of the Ninja Investor Programme that I run covers how to negotiate and how to phrase and structure your language.  www.ninjainvestorprogramme.co.uk.

 

You can learn more here:

 

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