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Due Diligence - Basic checks to do on a property to see if the deal stacks up


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Hello all,

 

I was just wondering what checks you do before purchasing properties?  Is there anything glaringly obvious you feel I have missed out of the basics I have listed below.  There are generally for houses that aren't new builds.

 

Many thanks :)

 


1. Check it is in a major town near to good transport links (roads/trains) and if a Family home then near to good schools (if it's on RightMove this is easy to do).  This must be in an area where investment is coming into the area.

 

2. Look on Google street view to see the property and also the types of cars in the road and if there is anything I want to avoid like a petrol station opposite, is there parking?

 

3. Check current rental prices on RightMove/Zoopla for similar properties nearby

 

4. Plug all of the details into a spreadsheet to see if it stacks up even if interest rates go up to 6% factoring in all costs such as voids, letting agent fees, etc - it must be positive cashflow [As a quick and dirty calculation minimum of a 7% yield as a single let]

 

5. Look at address sold house price and local sold house prices.  Also compare the current prices to the 2007 values to see whether it has a lot more to grow.

 

6. Look at current sale prices on RightMove/Zoopla and how long similar properties have been on the market for, also I use PropertyBee on Firefox which is excellent.

 

7. MousePrice.com and Walkscore.com

 

8. Ring several local lettings agents to identify demand and for what type properties, what can be achieved for the property in rental terms and how long it takes to get them tenanted and what types of tenant.

 

9. Also consider second exit strategy if it doesn't let - eg. what is the market like for that sort of property?

 

10. Visit the property and as well as general checks see the boiler and fuse board

 

 

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Nice list londoner, covers off a lot of the main points. If you work with RMP Property, they have the Big 50 report when packaging deals which covers off a lot of your list.

 

Others I might add include:

  • Crime rates, which you can check by street/postcode - you don't want to see your property with numerous recent anti-social (or worse) markings registered on it
  • Being the digital world we live in, a quick check of the broadband speeds your potential tenant/buyer may achieve - this might also be a good sign of the level of infrastructure in place in your area as those with high speed fibre optic might suggest the telecom companies have invested in it as well, compared to an area that's still struggling with <5Mb copper connections.
  • If possible, view the area/property during the day and night, as you never know what comes out after dark!
  • A good tip from Simon Allen is to check that the property isn't located near anything that might smell or waft over during a hot summer's day - e.g. restaurants, sewage facility, recycling/tips, as this may not just be a turn off to potential tenants/buyers, but may also impact on financing arrangements
  • Area planning - if you visit the local area's planning permission website or office, you might be able to see if there's plans to construct a mobile tower next to your property, or on the flip side, if they're planning to regenerate the street

I'm sure there's plenty more, but it's lunchtime and the stomach's grumbling.

 

Good luck! 

 

Personal Blog: https://abcdad.co.uk
Property Spreadsheet and Deal Analyser: https://abcdad.co.uk/property-spreadsheet
Looking to read some Property books? https://abcdad.co.uk/books/property-books
Follow on Instagram: @abc.dad

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Great lists, I completely agree.

 

For crime rates and broadband I find this site quite good: https://www.checkmystreet.co.uk/

... or more detailed crime stats, including history here: http://www.ukcrimestats.com/

 

Another thing I always like to check is how close the property is to flood risk, which can be checked here: http://www.checkmyfloodrisk.co.uk/

 

As a quick-start for the financial forecasting I've created my own tool that's available for free (please excuse the plug): https://www.patma.co.uk/prospector/property-profit-and-yield-calculator/

 

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19 hours ago, simon pither said:

As a quick-start for the financial forecasting I've created my own tool that's available for free (please excuse the plug): https://www.patma.co.uk/prospector/property-profit-and-yield-calculator/

 

If it was anyone from here who found that it wasn't working for calculations that don't need a mortgage this morning, thank you for discovering it and sorry it wasn't working - it's fixed now so please do try again.

 

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  • 5 months later...

I have also found a few other resources which may help people so though I'd add them:

 

- Home.co.uk - shows house price changes over past decade or so as well as loads of other info.

 

- StreetCheck.co.uk - Loads of useful statistics on areas from census

 

- Wikipedia - type in the area you're looking for and it will have a page in there with the history of the area, may be biased but worth a read regardless

 

- HomeTrack.com/UK - £20 for home price report and free city price change trackers on their website

 

- PropertyDetective.com - Free schools and general local population details

 

- Police.UK and Crime-Statistics.co.uk - crime statistics

 

- Zoopla also has area statistics

 

 

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  • 2 months later...

Nice one! Thank you Alan.

 

Although not specifically DD on a property I would also add to do DD on yourself! Or rather your credit reports - check them regularly to ensure there is nothing incorrect on there as it will affect the competitiveness of mortgages you are offered and access to finance.

 

This should be one of the first things you do in property, make sure there are no errors, such as missed payments that didn't happen - 30% of credit reports have errors and I found a couple of mine which meant paying higher interest rates, and it takes a few months to get them removed.  There are 3 companies and all 3 may hold slightly different data so check all 3 as different mortgage providers use different credit ref companies, this is the cheapest way to get your reports:

 

(1) Experian - MSE have an offer to get your free credit score and a free credit report once a month : https://www.moneysavingexpert.com/creditclub

 

(2) Equifax - Get your statutory reports for £2 https://www.econsumer.equifax.co.uk/consumer/uk/order.ehtml?prod_cd=UKSCR

 

(3) Call Credit - Your report is free through their website http://noodle.co.uk 

 

Best of luck!

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Found this post really helpful. Can anyone explain the relevance of the below point please? If prices are close to the 2007 prices, is that a negative and if so why? Thanks.

 

5. Look at address sold house price and local sold house prices.  Also compare the current prices to the 2007 values to see whether it has a lot more to grow.

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Hi Mark

 

2007 is when the UK property market / prices peaked. Some areas, especially regenerated sections of London, have since recovered and exceeded 2007 prices. Some other areas in the UK are still below the 2007 peak, like some parts of the North East. This may indicate that they still have room to grow and go back to 2007 price levels.

Personal Blog: https://abcdad.co.uk
Property Spreadsheet and Deal Analyser: https://abcdad.co.uk/property-spreadsheet
Looking to read some Property books? https://abcdad.co.uk/books/property-books
Follow on Instagram: @abc.dad

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Yeah, we have smashed the 2007 prices in London by around 80%, however lots of places around the UK have barely made it back to that level.  People talk about house prices but in reality prices are set by the availability and cost of credit.  Credit wasn't as cheap in 2007 as it is now, but if you had a pulse you could get a mortgage hence the bubble as people were fighting to get onto the market and buying additional homes for the expected capital growth, and the valuers weren't being particularly cautious about overvaluing properties as everyone thought you couldn' t lose in property.

 

We never know where the next recession will come from, it could be the sub-prime car credit, brexit, or something completely unexpected, but when people think they can't lose in property that is the time I will be cautious and either sell off poorer performing assets or ensure my level of liquidity is ready to capitalise on the next recession by keeping cash ready.

 

People acted with stupidity leading up the credit crunch, they were remortgaging their houses to buy cars, holidays, clothes, etc and felt that they were rich.  I feel that I am seeing the same at the moment with cars, everyone is driving a car they can't afford to buy to they are leasing to look wealthier than they are in front of their friends.  Precious few people are preparing for the future. Wealth doesn't appear or disappear during recessions, it merely changes hands from those who failed to plan to those who did.

 

In terms of house prices I am currently buying in the NW (Greater Manchester) and refuse to pay more than 2007 levels for anything to protect myself.  There are lots of Southern/Overseas investors piling into the North to buy new-build flats in the city centres so I am staying away from those types of properties.  I prefer houses in the suburbs which are yielding more highly and I believe will have a greater long term demand.

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As a note I would add one thing I have not specified earlier - a good lettings agent.  Personally a good agent to advise you on a road by road basis should be your first port of call before anything.  It will be the difference between a slam dunk and a property you struggle to get long term tenants in. Find a good agent and build a relationship.

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It really isn't hard, look for recommendations then go and meet them, discuss their systems, and go with your gut and make a decision.  Some agents want to expand their business in the right way and others are happy to tread water and pay lip service. I have met a large number of agents over the past year and very few I have been impressed by, like viewing properties I found it was a numbers game, and recommendations helped to reduce the time to find a good one!  They will be key to whether your business succeeds or not if you don't live near to your properties.

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  • 7 months later...

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