Due Diligence When Buying Property
Are you considering buying a buy-to-let investment but deciding what to look for?
Don’t worry; it’s natural to feel uncertainty and fear when making this decision. You probably put all your hard-earned savings into this investment and must ensure it is protected.
What is Due Diligence When Buying Property?
Due diligence thoroughly investigates the property and its surrounding area to identify potential issues impacting its value, safety, or usability. This article will discuss the due diligence process that should be conducted before buying a property in the UK.
Developer Due Diligence
Things to look out for when researching the developer;
- Previous track record
- Management experience within the developer
- Reviews online for their last built developments
- Transactional history of earlier developments.
When buying an off-plan property, you hear many horror stories. People needed to conduct the proper due diligence when buying off-plan property. The Property Geeks accomplish this for you and happily share this in a report before you purchase.
You want to ensure that the property developer you are buying from is reputable and has built solid properties previously, which have grown in value and have no short-term maintenance concerns after the building has been handed over.
For apartments, look online for reviews on their previous projects and see what the tenants have to say. Alternatively, you can look on other platforms, such as Air BnB, for reviews on the property, although this may be from something other than the developer but more from the landlord’s neglect.
The experience within the management team for the developer is significant. Is this company experienced, or is this just a quick cash cow, with you being the victim of overpaying for a poor-quality project?
Property Condition
The property’s condition is another crucial factor to consider during due diligence. Conduct a thorough inspection of the property to identify any defects, such as structural issues, dampness, or pests. Consider hiring a professional surveyor to conduct a full inspection of the property, as they can provide a more detailed assessment of its condition.
Planning and Zoning
What are the local plans for the area? Does the development you are looking to buy have all the correct planning consent, and are they available to you as a potential buyer?
If the developer cannot provide the proper planning approvals, steer clear. It is likely that the developer still needs to receive permission to build but is going through a fundraising exercise by making sales already. This is risky business; you should only do so if the developer is reputable and fully funded.
The Property Geeks will help conduct this research with you.
Environmental Hazards
Environmental hazards, such as contamination from pollution or hazardous materials, can impact the value and safety of a property. Conduct an environmental search to identify potential hazards, such as flooding or contaminated land. This information can be obtained from local environmental agencies or a specialist search company.
Utilities and Services
Check that the property can access essential utilities and services like water, gas, electricity, and sewage. If the property is located in a rural area, you may need to investigate alternative sources of water and sewage. It is also essential to check the quality of the services, such as the water quality and internet connection speed.
Neighborhood and Amenities
The surrounding neighborhood and local amenities can impact the desirability and value of a property. Research the area to determine the quality of local schools, transport links, and shopping and leisure facilities. It is also important to check the crime rates and the potential for noise pollution, such as from nearby airports or highways.
Legal and Financial Considerations;
- Mortgage rates
- HMRC Tax brackets
- Insurance
Finally, it is essential to conduct due diligence on the legal and financial aspects of the property purchase. This includes verifying that the seller has the legal right to sell the property and that no outstanding debts or liabilities may impact your ownership of the property.
You should also ensure that you have the necessary financing in place and understand the costs associated with the purchase, such as stamp duty and legal fees. If you use a buy-to-let mortgage, fluctuations in Interest rates can lead to the property being a liability for you if you do not manage this accordingly.
What does the additional income from your property mean for the tax implications? What income bracket will you sit in, and how does this affect your overall return on investment after tax?
Please speak to one of our experts who can help you to understand this better.
Summary
In conclusion, conducting due diligence before buying a property in the UK is essential to the property buying process. By thoroughly investigating the property or developer and its surrounding area, you can identify any potential issues that may impact the property’s value, safety, or usability and make an informed decision on whether to proceed with the purchase. With the help of a professional solicitor or conveyancer, you can confidently navigate the due diligence process and ensure that your property investment succeeds.
The Property Geeks are on hand to help you make this informed decision. Only properties or developments you have been offered from the Property Geeks have already conducted these due diligence checks, which is just one part of our valuable service to you as a long-term client.
Book your discovery call below to discuss which projects have passed our due diligence checks.
