NEW PODCAST: I tried to sell a property at auction – this is what happened
NEW PODCAST: I tried to sell a property at auction – this is what happened
Weekly data-led tips, local hotspots, and what actually moves the market.
Imagine you’ve found a property that looks perfect: great photos, decent price, and the estate agent is practically your new best friend. Time to put in an offer, right?
Wrong.
I get the excitement because I’ve been there. You start imagining yourself as a property mogul, counting rental income before you’ve even seen the place properly. But buying a property without proper due diligence is like getting married after a first date – it might work out, but the odds aren’t exactly in your favour.
Strip away the jargon, and due diligence is quite simple: it’s the process of finding out whether a property is actually worth buying before you commit your hard-earned cash.
When I talk about due diligence, I’m talking about four main questions you need solid answers to:
1. What’s it actually worth? Just because someone’s asking £200k doesn’t mean it’s worth £200k.
2. What will it rent for? If you’re buying to let, this isn’t optional. Your mortgage lender will want to know, your accountant will want to know, and your bank balance definitely wants to know.
3. Does it make sense for you? A great deal for someone else might be a terrible deal for you.
4. Are there any nasty surprises lurking? Because there’s nothing worse than finding out about Japanese knotweed after you’ve handed over the deposit.
Let me walk you through each of these, because getting this stuff right is the difference between a profitable investment and an expensive mistake.
Everyone bangs on about “below market value” deals, but you can’t spot a good deal if you don’t know what market value is.
Market value isn’t what the estate agent or seller says it’s worth – they’ve got their own agendas. It’s what someone would actually pay for it in normal circumstances, and to figure that out, you need comparables.
Finding your comparables
This is easier than it sounds, but it does require a bit of detective work. Here’s what I do:
The reality check
If a property seems significantly undervalued compared to your research, there’s usually a reason. Maybe there’s a planning issue or maybe it’s next to a sewage works, so don’t assume you’ve found the deal of the century until you’ve figured out why it’s cheap.
If, despite your best efforts, you can’t find enough good comparables, or if properties in the area vary wildly in price and you can’t be confident about value, it might be better to walk away than to guess.
If you’re buying to let, this step is absolutely crucial – too many investors work out their numbers based on optimistic rental estimates, only to discover the reality is rather different.
Unlike sold prices, there’s no historical database for rents, so you’re working from current asking prices, which means your research needs to be bang up to date.
Find rental comparables
Back to Rightmove, but this time hit the “rent” section. Take the same approach as before but include anything marked as “let agreed” because it shows recent market activity.
Look at the range between the highest and lowest asking rents, but ignore the obvious outliers – short lets, single rooms in house shares, or places that look like they haven’t been updated since the 1970s.
Pay attention to what explains the price differences. Is it size? Condition? Parking? Transport links? The better you understand these patterns, the more accurately you can position your property in the rental market.
Check with local agents
To save yourself some time, call a couple of local letting agents and tell them you’re considering buying a property to let. Ask about typical rents, how quickly properties let, and what tenants are looking for in that area. Most agents are happy to chat because they’re hoping to manage your property if you buy it.
If you do all this research, you should be able to estimate the monthly rent within £50.
This is where the personal bit comes in. A property might stack up financially, but that doesn’t automatically make it right for your situation.
Know your numbers
Once you’ve got a market value and rental estimate, you can calculate the yield. That’s your annual rental income as a percentage of what you paid for the property. But yield on its own doesn’t tell the whole story – you need to factor in all your costs too.
Mortgage payments, insurance, letting agent fees, maintenance, void periods, tax – it all adds up. The days of being able to offset all your mortgage interest against rental income are long gone, so make sure your calculations reflect current tax rules.
Know your goals
What are you actually trying to achieve? Capital growth? Income? A mix of both? Your strategy should drive your decisions, not the other way around.
If you’re after income you might have a target yield in mind, but if it’s growth you’re after, you might buy in an up-and-coming area even if the immediate rental return isn’t spectacular.
Listen to your gut
Numbers are important, but so is instinct. If something feels off about a property or an area, even if you can’t put your finger on why, listen to that feeling. Your subconscious might be picking up on something your spreadsheet has missed.
You can recover from overpaying slightly or getting the rental estimate wrong, but it’s much harder to recover from buying a property with major structural problems or legal complications.
Opt for an RICS survey
Regardless of how good the property looks, it’s often a good idea to get a proper survey done by a RICS surveyor. A RICS Level 1 Report will cover most scenarios, but if you’re dealing with an older property or you’ve spotted potential issues, go for a full structural survey.
Yes, it costs money that you might lose if you decide not to proceed, but it’s a lot cheaper than discovering subsidence after you’ve bought the place.
The survey will pick up structural issues, damp problems, and other nasties that could cost you thousands, and it’ll also give you ammunition for renegotiating the price if problems are found.
For new-ish houses, or modern flats in a block where the surveyor won’t have access to the expensive stuff like the roof and heating system, a survey is unlikely to tell you much you can’t see with your own eyes – but you might find the extra peace of mind worth the price tag.
Legal complications
This is where your solicitor earns their fee. They’ll check the title, investigate any covenants or restrictions, and make sure there are no legal issues that could bite you later.
Pay particular attention if it’s a leasehold property. Check the lease length, because anything under 80 years starts to get problematic for mortgages and resale value. Look at the ground rent and service charges, and whether there are any planned major works that’ll land you with a big bill.
Check if it’s mortgageable
Even if you’re buying with cash, it’s worth checking whether the property would be mortgageable – because you don’t want the nasty surprise of trying to refinance later, only to find out you can’t and your cash is stuck. It also affects your exit strategy – it’s much harder to sell a property that can’t be mortgaged.
Common issues include high-rise ex-local authority properties, flats above commercial premises, non-standard construction, or properties in areas with known problems.
Now to make things practical, here’s the process I follow for every property:
Before making an offer:
After offer is accepted:
Red flags to watch for:
Let me share a few things I’ve learned the hard way:
Estate agents aren’t your friends. They’re (usually) nice people doing a job, but their job is to get the property sold, not to look out for your interests. Take everything they say with a generous pinch of salt.
Perfect properties don’t exist. There will always be something – a bit of damp, an awkward layout, questionable decorating choices – but the question is whether the issues are deal-breakers or just minor annoyances.
Sometimes walking away is the right decision. I’ve walked away from properties after spending money on surveys and legal fees, and I’ve never regretted it. It’s much better to lose a few hundred pounds than to commit to a problem property.
Get comfortable with saying no. For every property you buy, you should probably reject ten others. If you’re not walking away from deals regularly, you’re probably not being selective enough.
Though it might look and feel like you’re being paranoid or pessimistic, due diligence ensures you’re making informed decisions with your money. The property market is full of people who’ve made expensive mistakes because they skipped the boring bits and jumped straight to the exciting part of buying, so don’t be one of them.
Take the time to do your research properly. Assemble a good team – solicitor, surveyor, accountant, mortgage broker – and ask the awkward questions. Always double-check the numbers and more importantly, trust your instincts.
Yes, all of this takes time and costs money upfront, but it’s a lot less time and money than you’ll spend fixing problems later.
Remember: there’ll always be other properties, so if this one doesn’t stack up, move on to the next one. The market isn’t going anywhere, and neither are the opportunities, provided you know how to spot them.
Weekly data-led tips, local hotspots, and what actually moves the market.
