Should You Survey A Buy To Let Property?

Should You Survey A Buy To Let Property?
Buying any property, whether it’s for personal use or as a buy to let investment, is an expensive proposition.

Not only is there the cost of actually purchasing the property, but you can expect to pay legal fees, search fees, arrangement fees, and valuation fees as a minimum.

With surveyor fees costing hundreds of pounds on top of the other charges, it can be tempting to forgo a survey and hope for the best.

This can be particularly tempting when it comes to a buy to let property, but is it false economy or should you survey a buy to let property?

Choosing a buy to let property

Choosing a buy to let property is different from choosing a home for yourself. The aim is to generate as much profit from the property as possible, rather than finding your dream home.

Considerations such as preferred tenant type will affect what and where you choose to purchase, for example there is no point buying a house for student accommodation if the area is some distance from the nearest university.

That said, in America, many people purchase rental units on affordable college campuses like Athens, Georgia, in order to find university students as tenants.

One major consideration is the potential for renovation costs, particularly with a property bought at auction.

A property in poor repair is unlikely to attract good tenants, and it will affect the rental income that you can expect to enjoy. Likewise, an extensive renovation period will mean that it will take longer for the property to start generating an income.

How can I buy a buy to let property?

Common Problems With Auction Properties

There are two ways to buy a buy to let property: in the conventional way and at auction.

When purchasing in the conventional manner, you would visit the property to view it, probably more than once, and put in an offer.

There’s usually a reasonable amount of haggling involved, as you seek to purchase the property for the lowest price possible, while the sellers want the highest price they can achieve.

When purchasing at auction, typically there is a limited window of opportunity to view a house up for auction – anywhere between two weeks and a month’s advertising is usual.

You should expect a property going to auction to be in a much poorer state of repair than one for sale in the more conventional way.

Ideally, you should try to take a surveyor with you when you view the property, although time constraints may well make this impossible. It’s important to make the effort, however, as the next section explains.

Differences between buying at auction and buying normally

There are significant differences in purchasing a property at auction, compared to the normal process of buying a house.

When purchasing a property in the conventional way, you can expect to wait at least a couple of months while searches and legal matters are completed.

In England and Wales at least, you can pull out at any time up until the point of exchange of contracts with no financial penalty(the situation is different in Scotland), which can be useful should a survey identify any major issues.

When purchasing a property at auction you are committed to the purchase once the hammer falls. You will have already invested a few hundred pounds in administration fees before the auction even starts.

Conveyancing Legal Documents

You’ll be provided with a legal pack for the property(ies) you are interested in, which will include the results of the local searches and title deeds in advance of the auction.

Should you be the lucky bidder, you’ll have to pay between 5-10% of the price there and then. The remaining amount must be paid within 28 days, or you lose the property and your deposit.

You may also find yourself incurring additional costs, such as paying the costs for re-selling the property, making up the shortfall between the price you agreed to pay and the final selling price, should it be lower, and perhaps even interest for each day until the house is finally sold.

Why should I get a buy to let property surveyed?

There is no legal requirement to have a property surveyed, although mortgage companies are likely to insist on a valuation survey, so that they can be sure that they can recoup their investment should you default on the mortgage payments.

However, it is worth getting a survey done for your own purposes, for a number of reasons.

The first is so that you know exactly what you’re getting into. No-one wants to buy a house then find a short while later that the damp coursing needs replacing or that there’s subsidence.

Knowing this in advance will help you to make an informed decision about whether the property is financially viable. 

The second is that it can provide you with scope for negotiation, particularly if the repairs are likely to be expensive. Once contracts are exchanged, any problems are yours and yours alone, and it’s up to you to pay for any repairs, which can prove costly.

Should you be buying at auction, you can factor the repair costs into the maximum price that you’re willing to pay.

For a buy to let property, a survey will also give you an indication of how long renovating a property may take so that you can again build this into your financial plans.

This is especially important if you have a mortgage to pay while the property is empty.

Survey types

Find & Compare Chartered Surveyors

There are a number of different survey types. These are:

  • Condition report
  • Homebuyer report
  • Building or full structural survey
  • New build snagging survey

Any survey should be performed by a Royal Institute of Chartered Surveyors (RICS) member so that you can be sure of a high standard of service and adherence to industry standards and regulations. Should you need advice on how to choose a surveyor, this article may help.

RICS Condition Report

The cheapest and most basic of surveys, this simply describes the condition of the property, identifies any urgent problems, and pinpoints potential risks or legal issues, although no advice is provided.

It is designed for new-build houses and properties that are clearly in good condition, and will use a simple traffic light system to flag up any problems.

RICS Homebuyer Report

The next step up from a condition report, a Homebuyer report is ideal for properties that are in reasonable condition.

It identifies structural issues such as subsidence or damp, and examines both the inside and outside of the property. However, it doesn’t examine anything below the floorboards or behind the surface of the walls.

Some Homebuyers reports include valuations, which can be useful for re-negotiating the purchase price should any major issues be identified.

It will also include a ‘reinstatement figure’, which is the amount the property should be insured for to cover the costs of a rebuild.

Building or full structural survey

The most in-depth and comprehensive of all survey types, these reports contain detailed advice on any repairs that are likely to be needed.

Again, it doesn’t examine what’s below the floorboards or behind the surface of the walls, but it should include the surveyor’s opinion for the potential of defects in these areas.

While it’s unlikely that a valuation will be included, the advice provided by the surveyor will provide a good starting point for evaluating the likely cost of repairs, which can again be used for re-negotiating the purchase price.

New build snagging survey

While one would hope that a new build is built to the highest standards, they can have issues just like any other property.

As the name of this survey suggests, this is simply an inspection to identify any defects in a new build property. Any problems should be fixed by the developer prior to taking possession of the property.

Which should I choose?

Choosing the correct survey for a buy to let property will largely depend upon the age and condition of the property. For a newish property in excellent condition a Condition report should be adequate.

For those properties in generally good condition, a Homebuyers Report is in-depth enough to highlight any serious issues and give a good overall view of the building’s state of repair.

However, if you’re buying an older property, or one that is in disrepair or poor condition, a building or structural survey would be more suitable to help prevent any nasty surprises.

You can read our article on the difference between a homebuyers report and a structural survey to help you decide between the two most popular types.

Summary

With all the costs associated with buying a property of any kind, it can be tempting to skimp when it comes to a survey.

However, there are compelling financial reasons for having a survey for a buy to let property performed, where return on investment is the key consideration.

If you do decide to get a survey conducted, you’ll need to be sure you are using the right surveyor for your needs. Check out our guide to choosing a chartered surveyor.

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