This article will give you five essential rental property buying questions that you should ask whenever you are considering buying property for investment purposes. Failure to ask these questions could end up with you wasting time attempting to do a property deal that was never really a deal to begin with, or it could end up with you losing huge amounts of money.
How long have you owned the property? – Novice property investors and developers regularly fail to ask this question and therefore end up spending hours researching and haggling on a property deal that was never really going to happen in the first place. The reason this is such a key question is because once you know the answer to it, you are 60% towards working out whether the person selling can afford to sell to you cheaply enough for it to be worth your while. For example: if the person in question has only owned the property for two years it is unlikely they will have enough equity in their property to be able to sell you their property at 15% plus, below market value. On the other hand, if the sellers have had their property for over 10 years there is a good chance that it will be worth almost double what they originally bought it for; therefore, there is a much larger likelihood that they can absorb a 15% plus, below market value offer.
Why do you want to sell? – This question will help you to access their motivation for selling. If they just want to sell because they think house prices have gone up recently and they want to cash in on this fact, then you are probably not going to be able to buy their property at a good price. Alternatively if they need to sell quickly because they have got themselves into financial difficulty or their job has relocated to a different area and they need to move with it, then you might be able to negotiate a good discount.
How quickly do you need to sell? – The answer to this question will again be a key indicator as to how motivated they are. If they say that they are not in any great rush and they will sell as soon as they get a good price, then you will probably not get a good deal. If they say they need to sell this month because they have already put in an offer on another property and it will fall through unless they are able to sell their property within the next month, then you might be able to negotiate a good below market value deal.
Is there any debt secured on the property and what sort of debt do you have secured and unsecured? – This question might seem a little intrusive, but it is essential. If they have a property that is valued at £200,000 and they have a mortgage on it of £150,000 and they have £25,000 of secured or unsecured debt that they wish to pay off, then if you already know that the maximum you can offer to make the deal stack up for you is £165,000, then you know straight away that this deal is probably not going to happen. If you had not asked this question, then you would probably have wasted your time and money pursuing a deal that was never realistically going to happen.
Would you like to be a tenant in the property after we have bought it? – People that need to sell because they have got themselves into financial difficulty often don’t actually want to move. This is especially true of families who have kids who are happy at local schools. If they would like to still live in the property you potentially have the makings of a ready made tenant and once you know this fact, it can help you think of ways to create a win win situation, a lot easier.
The list of five rental property buying questions above is by no means exhaustive and there are many other things you need to know and find out about; however, the above list should give you a nudge in the right direction and help you to make more financially sound decisions.
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