Due Diligence, have your say!

[Ryan.]

Hi,

As a new member, and overall newbie when it comes to letting, I've come across this term 'due diligence' many a time in my research. Im sure other new buyers/landlords will agree with me on this and say that it is a almost a scary phrase.

I have set up this thread for the more experienced landlords that wish to help new investors explore this term.

Please feel free to write or even just list everything you feel comes under due diligence whether buying a setup or un-setup HMO, or single let house. From renewing contracts to choosing surveyors the list is vast and can be quite intimidating when your money is at risk!

If this thread is successful, I will go on to make a comprehensive list of 99% of the things that need to be covered and investigated when making that first big purchase.

Thank you in advance!

 

[diyhelp]

The first thing I would say, your solicitor should have a list of due diligence to carry out for various types of investment. Best to start there?

 

[PostBrexitInvestor]

While I would certainly advise hiring the services of a solicitor with expertise in property, it might be useful to start a list for others to follow. Surely there is no harm in knowing what you are getting yourself into?

 

[FWL]

I tend to leave due dilligence to the experts and stick to what I do best - researching my next investment

 

[Ryan.]

That was my first thought 'leave it to the experts'. However, as this will be my first investment, when im going to view properties i would like to know what to look for/ask.

As everyone has difference experiences i thought it would have been good for people to share and almost create a small initial checklist so you dont end up wasting time on something that should have been picked up on?

 

[Nicholas Wallwork]

Great idea @ryan I’ll add a few off the top of my head!

Firstly I think you have the investment due diligence which is around whether or not the investment works or not! Then once you’re happy with all of that you can move onto the legal due diligence which to be honest is best left to a solicitor.

For the investment you should look at:
- market data. Compare local prices and rental incomes and check they match up to the investment you’re being offered. An independent valuation will also help (but that can come at the mortgage stage).
- talk to at least 3/4 local sales and letting agents to also gather that data. Ask how nice a particular area is and which areas in that town to avoid. They will have the best “on the ground” knowledge of where to invest for the best long term income and capital appreciation.
- get a structural building survey done. You can walk around before hand also and look out for large cracks, damp or mould etc but when you’re past that first hurdle it’s important to have the building checked out by a professional.
- get a good mortgage broker who can advise on your lending capability. It could be the best property in the world but if you can’t afford it you’ll have to rethink your strategy.
- make sure the property lends itself to your chosen strategy. E.G. HMO’s or single let’s, services accommodation or rent to rent are a few popular strategies at the moment.
- think about the management of the property. How are you going to manage it, is there a trustworthy agent who can help? Will you do some of it yourself?
- check the contracts with the current tenants. AST’s are the norm and mortgage lenders like these. If it’s for shorter term let strategies you may only have licences or nothing at all so make sure you know what you have and check the lender is ok with that.

There’s lots more but there’s a starter!

Kind regards
Nicholas



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[PostBrexitInvestor]

Hi @Nicholas Wallwork

Would you also consider your exit strategy at this point so you have something to aim for?

 

[FWL]

As we all appreciate, property sales brochures are created as a means of focusing on the positives and ignoring potential issues. While it seems obvious, there are still people out there who are quite happy to purchase a property on the strength of the sales brochure without actually visiting the premises themselves. When they do finally get the keys and take a look inside, they will then get an insight into the real challenges!

So, one vital part of due diligence is to visit the actual property and while you are there take a wander around the local area noting any pros and cons that may impact long-term property prices and rental income. It is also sensible to see whether there are any new developments or perhaps infrastructure spending such as improvements to the local transport network. These can have a significant impact on property prices in the future.