To Buy or Not to Buy? Property Experts Share Their Advice
It’s no secret that there’s been a huge boom in the housing market recently, but is property still a worthwhile investment?
'Properties are getting snapped up within days of going on the market, with most sellers having to turn down viewings as they have too many booked in,’ says Katie Crosby, Mortgage and Protection Adviser at Durham-based mortgage and insurance broker, 313 Financial. ‘Then the sale usually goes to best and final bids. That type of thing only really used to happen in London, but these days there are a lot of buyers wanting to move away from the cities for a quieter life in the countryside or by the sea, and so it’s happening all over the country.’ When asked which type of properties she thinks will see the most financial gain over the next 10 years in our region, Katie says it will be properties by the coast or in the countryside. ‘I have had so many clients relocating from the cities to a quieter, slower pace of life since the pandemic hit. Home working has a lot to answer for.’
However, buyers must be in a good position when looking to purchase. ‘Many sellers won’t accept an offer unless you have your current property already sold, so it makes it a more difficult process,’ Katie continues. ‘Many of my clients have sold their properties and move in with family while they search for a new property so that they are in the best position possible when they make an offer.’
When it comes to viewing a property for investment purposes, Katie has advice to share. ‘From a lender’s perspective, the property has to be habitable and has to be pretty much ready for tenants to be able to move straight in. They will allow for a couple of weeks of decoration, but a lender expects the property to be tenanted pretty much as soon as you complete on the purchase. So there’s no point trying to buy a wreck with a mortgage as a buy-to-let, as it just won't go through.’
At the moment Katie is receiving an increasing amount of holiday-let enquiries. ‘Due to the pandemic we all know that staycation holidays have been thriving, and many clients are wanting to jump into this market,’ she says. ‘You can of course earn a lot more from weekly holiday rentals than a normal monthly tenancy agreement. What many don’t know is that often you need a larger deposit than a normal buy-to-let, and criteria for obtaining this type of mortgage is more stringent, and there are not a huge number of lenders who offer this type of mortgage.’
Katie’s top tip for buyers:
‘Before you even start looking, speak to a broker, find out what you can borrow and get a decision in principle. Many sellers won’t even consider an offer without confirmation you can actually get a mortgage. You also need to ensure you have your deposit ready to go and have proof of this. If you’re selling your current house to fund the new one, you will often need an offer accepted on yours and have a memorandum of sale to prove it.’
Katie’s top tip for sellers:
‘It’s a seller’s market at the moment! Properties are selling for way over asking price. However, this does cause issues when sellers try and get a mortgage as we are seeing the lenders down value a lot of properties. So although more cash sounds promising, it’s not always feasible if the sellers are going to be buying with a mortgage, so it helps to be realistic with your sale price.’
Estate agency Finest Properties have also benefited from the property boom with record sales. ‘As 2022 gets underway it’s clear that the pandemic drivers of activity in the market will remain in play, bolstering the market and boosting prices,’ says Managing Director, Ryan Eve. ‘Demand for prime residential property remains high,’ he continues. ‘It’s a show of resilience that few could have predicted, but the market has evolved.’ Competition is set to remain high though, with Rightmove predicting further growth in the North East. ‘If the right property becomes available, act quickly to secure it.’
Finest Properties advise their clients to focus on their sale before focusing on a purchase, to ensure they are what Ryan calls ‘transaction ready’. ‘Do what you can to ready yourself for the market place,’ he advises. ‘If you need to sell a property in order to buy, ideally come to the market with an offer on your property or at the very least ensure you are in conversation with agents about listing your property.
‘Every client has unique requirements and our advice is always tailored accordingly. Naturally, the situation varies depending on investment objectives but taking the projected growth rates into account, long-term investments will no doubt prove appealing to many. Avoid mistakes like underestimating build and material costs by getting good advice at the earliest opportunity.’
Ryan says looking at a property’s heating system and windows is a good place to start when adding value to a property, but agrees that conversions such as an annexe will typically add value too. ‘Extra space has become non-negotiable for many homeowners across the UK,’ he adds. ‘We are continuing to see strong demand for detached properties in a semirural location, with ancillary living accommodation such as an annexe commanding a premium.’
Ryan’s top tip for buyers:
‘We are continuing to register new buyers from right across the UK and internationally. In this fast-paced and competitive market, our advice is to prioritise becoming transaction ready.’
Ryan’s top tip for sellers:
‘Instruct an agent who understands your property and what you want to achieve. Build a rapport with your agent and get the advice that you need. Consider all options, even renting, when it comes to securing a ready buyer.’
Sunderland-based Bespoq, a commercial solutions company who work closely with entrepreneurs to provide financial help and support, are still seeing strong demand from investors looking to acquire properties. ‘The demand seems to be outstripping availability,’ says Director, Lucy Hope.
‘We have noticed that lots of our clients are using their own cash resources to buy stock quickly and are then looking to refinance to release equity thereafter.’
Considering your finance carefully is important when it comes to investing in property and there are lots of finance products available outside normal buy-to-let mortgages, as Lucy explains. ‘A standard buy-to-let mortgage may not be suitable for landlords with large portfolios, or an investor that is looking to refurbish and sell a property within a short time period. Speaking to a specialist broker will help you find what options are available and find a solution suitable for you.’
So which finance products can investors choose from? It seems there are plenty. ‘For larger portfolios, a commercial loan combining a number of properties may be an advantage to the investor to utilise rent across the whole portfolio to service the debt, which may allow them to release more equity or secure a better overall deal. It may also make repayments easier to track and manage,’ explains Lucy. ‘For investors purchasing properties at auction, or those in need of refurbishment, they may require a short-term solution with a longer-term plan in mind.’
Taking some advice prior to committing to a deal is always advised: ‘We often see clients who have already committed to large transactions without giving themselves time to consider them fully. This can end up costing them tens of thousands of pounds that could have been saved with the correct plan from the outset. Careful planning can make your investment properties work much better for you, far beyond just saving a small margin in rate.’