How To Buy Your First BTL Investment Property (Start to End)

[Music] in this video you'll learn how to buy your first investment property with the least amount of risk and the least amount of activation i'm going to be covering location property funding contract offers and management in this video for those who don't know me i bought my first investment property back in 1997. it was in a place called frye barnett in london n11 i bought this for the grand amount of 65 000 pounds where the bank of england interest rates back then were seven percent and they were rising and that property rented for 650 pounds per month i didn't know a lot about property back then but what i did know is that property was positive cash flow and that generated me over 200 pounds a month in passive income [Music] since then i've gone on to buy commercial and residential property in the uk australia and the us with my most recent purchase being this year a commercial tenanted office that generates 87 grand a year investing in property has become my passion and i do believe this is the best way to build wealth for yourself and to leave a lasting legacy from your family no doubt you're concerned about recession at the moment the rising inflation the high interest rates and the high cost of living that we're all experiencing but all of these things existed in the 90s when i first started investing but all it matters is that you're buying positive cash flow products from day one and that's what this video is going to really help you do [Music] the first thing you need to do is to become an area expert buying in an area that you don't know much about is pretty risky and it can be a costly mistake as this can severely derail your ability to grow your own property portfolio [Music] talk to agents set up property alerts get to know the prices for all the different types of properties in that area this way when a property hits the market and it's on a good price you're in a position to move fast get out there and walk the streets understand where the best streets are in that area where the worst streets are in that area and why that is and what's the difference in between and kind of walk them at different times of the day just to see what's happening in the neighborhood at those different times is there loads of noise is there suddenly a massive rush of people at certain times of the day is it like a cut through street where during rush hour there's all the traffic banked up no one can get in or out it's a nightmare getting in or out parking's really difficult at certain times of the day it's good to know these types of things you're not going to get this just by looking at street maps or potentially looking talking to an agent you need to actually get out there walk the streets and do the type of thing for yourself but you put the hard work in now you'll get rewarded for it later because when a property comes up in that particular street or that those streets that you've identified you can move fast i recommend going at least talking to three different agents in the particular area that you've identified that you kind of like to invest in we want to be doing this so we get a diverse set of opinions we don't just want to get one person's opinion because they might have only been in that area for a short amount of time when you're talking to agents find out how long they've been an agent how long have they been in particular that area as well and find out if they even if they live in that area they might well do they're going to be able to bring you a lot more knowledge about that area if there's an agent that's just been working in that office for six months he lives on the other side of town first time being in that area don't bother wasting your time with that guy or person you want to be talking to someone else that's been there for a long time uh and knows that area well been an agent in that particular location for a long time ideally when we're thinking of properties we're also thinking of tenants so we need to be thinking about our tenant profile when we're looking at buying a property what type of tenant's going to go into this type of property because if it's a three bed house is it going to be going to families if it's a three bed house in certain areas could it be a human it could be going to young sharers or it could be going to students or nurses depends on that area or if it's an owner-occupied area that's great for families it's got a plague around nearby and it's got great schools nearby it's in certain catchment areas then that property would appeal more to families rather than say students so this is what you're trying to do at this stage is build up that tenant profile and build up the type of property that you want to be buying based on what's the most in demand for that area is it more student focused is it more family focused what's in the demand where can you generate the most amount of rent and this is the type of question you'll be talking to the agents and go and talk to some of the neighbors in the area as well and say what's it like on this street do you enjoy living here how long have you lived here ask these questions of the neighbours don't be afraid someone's out gardening just go up to them say hey i'm thinking of buying in this area what do you think of it how long have you been here when you're walking the streets the more you do it the more you'll start to recognize owner occupied properties versus tenant properties what you'll find is that own occupied properties are all neatly gardened they're all looked after they're all weeded you go to tennant properties and you'll find that they're not looked after as much there's weeds the hedges are overgrown the grass hasn't been cut for weeks and this is just the nature of the tenants versus owner occupiers tenants don't care about as much for the property they're just living there to live there whereas their own occupiers take pride in their house they've invested in their house the house is worth something to them they're going to look after it and maintain it over the period of time they're living there and this type of information can then help you determine whether you want to invest in that particular area because there might be more tenants than you care to buy in that area because every house in that area looks like it's not being looked after so do you want to buy in that same area if you're in a street where every every house is looked after you buy an owner-occupied house but you're going to rent it out to a family and hope that they're going to look after it the same way everyone else is in the street more than likely they will do and that's because they're potentially going to be there in the long term especially the young kids it might be that they want to go to school in the area which will then tie them to that particular area so they can keep going to that school and they'll likely be there for more than just 12 months student properties you've got high attrition there's turnover all the time but if it's in a good demand area then you're always going to rent it because there's maybe more demand than there is supply another key thing when you're looking at areas is the crime rate now you can easily go and research this just on google put in crime rate and putting the local area and then you can look at all the different crimes that have been committed within that area and then you might be able to narrow down as to particular which streets have got worse types of crime than other types of crime and this can really help you drill down to say okay that area i don't want to be in i want to be in this area where there's less types of stuff you can even go and look at the local police website and they may give you extra information about the types of crimes happening the types of streets it's happening on what's been happening in the area crime related you also want to be looking at the schools how well are the schools performing are they good are they outstanding which streets are in catchment areas for say the outstanding schools it's a key consideration if you're looking for like the three bed family home if you can buy in the catchment areas of those they're always going to be in demand [Music] once you've decided on an area and a likely tenant profile you can then narrow it down to the type of property that you want to buy this is also going to be driven by your budget but this is also going to be driven by your understanding of the area and the type of tenant that you want to rent to because there's more demand for that type of tenant maybe or you can get a better return for that type of tenant one particular consideration is if you're going to be renting to sharers you may need to get a hmo license so has a multiple occupancy license this is the case for anything with five people or more that are unrelated where they're sharing toilets bathrooms and kitchens and it's a potential for people weathers for properties where there's more than three people in that particular property you can go and check this online at the local council website as to whether you actually need a html license for three or more people in your property that are unrelated [Music] in parallel to all of this you need to be saving some money because you need to get together your deposit one way to do this is obviously to save your salary but don't just save it and put it in a bank potentially depending on your attitude to risk is you take that money and you invest it into stocks or crypto even to generate an additional return on that money while you're trying to build that up and this way you won't be able to build it up a bit quicker you might be able to get a 10 return over the time that you're saving that money and investing that money potentially risky if you're doing it in crypto it's very volatile in certain stocks like index funds like the s p 500 is something that's quite safe i invest in that one i do invest in crypto but only kind of the amount of money that i'm prepared to lose or i'm not too fussed about this is because the interest rates right now are like two percent or something they are going up but it's not really as good as the returns that you could make if you put that same amount of money but in the stock market or putting on some crypt though another way to get your deposit fast is to borrow money from your friends and family you can potentially get this at zero percentage rate and have flexible terms to pay it even if they charge you a bit of interest doesn't matter it's worth it in the end because it'd be less than what you'd be paying from the bank plus you get flexible terms no doubt they're not going to hold you to it if you miss a payment or if you're late it's not the same it's friends and family everything's kind of mates rates another thing i've done is i've just sold unwanted stuff that's just around the house you no longer need you know you might have an expensive bike a mountain bike or something like that that you don't use anymore you use it once a year do you really need it it's worth a thousand pounds go and sell it quickly build up your deposit that way there might be other electronics gadgets around the house that you might have another thing that i've definitely done when buying houses is to sell my car and this is just because i needed to get the money quickly that way you can get 10 20 grand depending on how much your car's worth quickly to buy your house get your deposit done and then just buy a smaller car less expensive car if you really still need a car and that way you can get your deposit built up quite fast to get started with your first investment property you're going to need i would say at least 30 000 pounds now this money also needs to cater for stamp duty and legal fees this will dictate as to what amount of money you can buy your house for and then also probably which areas you'll have to start to look in but then drill it down from those areas into which particular areas within those areas like postcards within those areas the best way to get a buy select mortgage these days is to go through a broker and you want to get a broker that's got access to the whole of the market and kind of has been doing their job for a while so interview them don't just go to a broker and let them dictate to you all the terms that they've got for you to fill in all their questionnaires and all this stuff and then pay them some money even you can get brokers where you don't need to pay them any money i'd push back on any broker that tries to charge you money and keep looking and this way if we're all the same we get rid of these brokers that try to double dip charge us money and also get commission from the banks as well just taking the mick don't go with brokers that try to charge you money or if they do to say i want to pay zero money or i'm gonna go somewhere else you already get paid commission if they still do walk away find another broker that's what i've done lots of times so find a broker's got hold of the market doesn't charge you any commission and knows their stuff been doing it for a few years not someone that's just wet behind their ears just done it six months ago you know kind of thinks they know it you gotta interview them find out what their history is how many transactions they've done in the last 12 months when was the last time they did a transaction similar to what you're trying to achieve and what's the chance is based on your scenario that they can get you a loan and how are they going to manage the process are they going to be hand holding you the entire way which is what you kind of want because they're getting paid commission for this irrespective whether you're paying them or not they're going to be getting a good amount of money from the banks the lenders based on the work that they're doing so you want to make sure that they're earning their money with it and they're not just going to leave you in the lurch find out if they've got any holidays coming up over the next six months and things like that so they know they're always going to be around how big is their team are they going to be there to support you who else is their backup what's the escalation point if you're not happy with them all that type of stuff you know treat it a bit like a job interview in the fact that you're interviewing them as much as they're interviewing you about your financial situation once we sorted all of that out we're happy with the broker you want to then get an agreement in principle because this agreement in principle you can then take to the agents and when you're making offers this is really going to put you ahead of anyone else that hasn't got their stuff sorted out and it shows and it will also show you how much money you can actually buy and borrow based on your deposit and the money that you're going to be lent you can then buy that type of property factor in the stamp duty factor in any legal cost any bank fees you've got to pay any valuations that you might have to pay for as well in all of that encompassing amount of money that you need to think about for buying your first investment property [Music] so now we've decided on an area we've decided on our property we've got an agreement in principle now we need to be making some offers if you're not making offers you're not making money so don't be afraid to be making offers because you can always pull out of properties if your due diligence doesn't stack up and how you work out how much to make that offer is you work out what the buy price should be based on how much is cash flowing and what return you're looking to make out that property to work out the buy price you take the annual rent divide it by the return that you want and that will then equal the offer price that you want to be making so for example let's say that annual ends 12 000 pounds you want a 10 return so you divide that by 0.10 which is 10 that will then equal 120 000 pounds is your offer price for that property so you make that offer to the agent giving the agreement in principle you write up any conditions that you've also got with our properties subject to finance subject to your due diligence property inspection valuation different conditions but the more conditions that you put in there the less attractive your offer is so it's a balance between how much you can really want that particular property is it a great buy at the price it's already at or is it something that's been sat on the market for ages you're lowballing them you're going to put all these conditions in because you're prepared to walk away if it doesn't stack up you make the choice you can also put in there that you want early access into the property let's say you want to refurbish it you put in a condition that says on exchange i want early access to the property i'm going to bring my contractors in there we're going to fix it up and then we're going to have settlement whenever it could be 60 days after exchange or 30 days and in that time you're in there fixing up the property while they're still paying the mortgage for it so to speak and you're not incurring any fees [Music] so your offer has been accepted it's not a time to go and pat yourself on the back sit back relax go on holiday now you need to go and check your opinions and your assumptions that you made about that property before you put in the offer and see if they're actual fact now this is called due diligence so as part of you due diligence go and check the property again go and really walk around at this time take a clipboard identify all the rooms and work out what each of the rooms are like as in is there any damp in them is the windows all good it been redecorated recently maybe there's a reason maybe it's hiding something maybe there's damp rising damp go and check that stuff is there mold outside is there gaps in the roof is any cracks outside on the walls any cracks that have been recently filled that type of thing this is what you want to be looking for when you do your second inspection maybe take a if you're going to be doing some renovating maybe take a builder contractor with you that can kind of do that assessment with you you might have to pay them for their time to do that but this may reassure you they can check in all the nooks and crannies and double check everything's good you can also get a survey done as well but if you want to just quickly get someone around if you're worried about one particular thing get that contract to the builder to double check those types of things for you but if you just want a general one just get a survey done or because the valuation isn't really gonna do much about the structure and things like that it's more evaluation for the lender to enable them to see if it's okay to lend against that property you know it's not going to fall down or anything like that it's still going to get their money back based on the loan to value ratio that they're giving you so you know if you're concerned about stuff get a proper survey done of that property if you don't want to spend that it might be cheaper just to get someone around initially for an hour with you check it out if that's successful then get a building survey done it's entirely up to you your appetite for risk and what you already kind of know about houses and whether you think it's okay to proceed or not does anything need to be changed to meet an epc rating that you might need to get at the moment the lowest epc rating to rental properties e that's going to be changing in 2025 to c and it's going to be and that's just on new tenancies so on pre-existing tenancies you're going to need to have an epc rating of c for those by 2028 but essentially work towards 2025 for any new tenancies especially if you're buying a property untenanted you're going to be needing an epc c rating in 2025 so it's a couple of years away yet you need to be thinking about that budget that amount of cost to make those changes to fix that property up and think about that when you're making your offer and you can put that as the reasoning why you're making your offer the way it is because these things all need to be fixed to meet what you're trying to achieve with a property to meet that ebc rating that's just around the corner maybe but before you go to exchange make sure the lender is happy with everything because if you're getting a buy to let mortgage you want to make sure that that lender is good to go and has got the money available for you the valuation is valued up okay everything's come fine with the house you know everything that they needed for their terms and conditions for them lending you the money make sure that's all satisfied before you exchange which your solicitor should be checking this for you anyway but be mindful that you need to be making sure everything's good to go before you exchange and then move into settlement so once you're happy with your due diligence and everything set up you can then move into exchanging contracts with the seller on that particular property this usually happens in two steps so you exchange and then you've got a settlement date it can happen that you can exchange and you settle on the same day i've done this before uh it's the kind of solicitors prefer a little bit of a gap just because they've got maybe multiple things that they're trying to organize so the settlement date is identified when you exchange contracts and at that point you can then work out what you want to do how far you want that to be out it's negotiated with a seller it's entirely up to you when you make that settlement date [Music] once you own the property you've got a couple of options it may be that it's already tenanted and you want to keep the tenant in place or if it's vacant you might want to refurbish it or it might be that you're happy with it as is and you're just going to rent it out because it's owner occupied and therefore you've got to wait for them to get out until you can rent it out to find a good tenant you can do this yourself or you can get a property manager now if this is your first investment property i recommend that you get a property manager in place to do it for you i did it that way and then i took on and managed properties myself and then i decided against that and put property managers in place going forward now it depends on your appetite for aggravation how much potential money you might be saving it just depends you know how you value your time how close the property is all those types of things definitely your first one i'd get a property manager there just because you want to understand how it should work they'll kind of hand hold you through the process and you can ask them lots of questions while you're doing it they may charge you between 10 and 15 to fully manage the property which you know you factor that into your costs when you're doing whether the property is going to cash flow for you anyway do it at the 15 the worst case scenario and this way you've got someone that's going to be professionally managing your property for you which is always good the first time and then you can decide after that so once that tenant leaves for example you can then say okay the next one i'm going to rank my i'm going to manage myself and see how you go you know you have to pull together the lease you have to put deposits into the deposit scheme so that they're saved you're not touching them you're not spending that deposit it's properly saved away and you then have all the calls from the tenants so anything that goes wrong they're calling you first and you've got then either get someone around there or you go around and fix it yourself so you can you know you're saving yourself 15 maybe by doing that but how many calls you get how well is the property maintained so all these things you need to make a judgment call on as you get more experienced uh as you're managing those properties the more properties you buy the more properties you manage you'll get a bit more of a feel for this type of thing if you've got a busy full-time job you want to relax in the evening you don't be taking calls during the day while you're at work on your property maybe you want to get it properly managed by a professional knowing where to start can be the hardest step for most property investors so i've pulled together this video where i look at where you can buy positive cash flow properties for under 150 000 pounds and break it down into which postcodes you should be starting to look in and maybe some of these are right about where you are living so go and check out that video now

Channel: Stephen Duncombe

Views: 14,719

Keywords: how to buy your first btl investment property, property investing, real estate investing, buy to let, How To Buy Your First Investment Property, how to invest in property, property investment uk, real estate investing for beginners, investment property, how to buy your first rental property, property investing uk, property investing strategy, buy to let basics, property training, property investing for beginners, stephen duncombe, investing in property, buying property

Id: 0NyOWS0qLmI

Length: 22min 39sec (1359 seconds)

Published: Wed Aug 24 2022