If you want to invest in property, I believe that there's 10 keys skills that you need
to master.
And skill number three is doing property due diligence.
And so, let me show you exactly what you need to do here.
Hi my name's Tony Law from Your First Four Houses and my channel's all about helping
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So as I say, I reckon there's 10 key skill you should become familiar with in order to
be a successful property investor and skill number three is due diligence because property
is obviously a really big investment, isn't it?
You obviously don't want to discover any problems a bit further down the line or you also want
to be absolutely sure that when you look at any property, that it is absolutely a deal
before you start plowing ahead.
Because if you do some really good due diligence, establish that it's not a good deal, you want
to drop it quickly and move onto that next property and start doing due diligence on
that one.
Okay, so let's imagine that you found yourself a great little property and the estate agent
is telling you, "This is an absolutely fantastic deal, you gotta buy this now."
The first thing I would have to say here is that with no disrespect meant to estate agents,
obviously, they get paid if they sell that property.
Obviously the seller obviously pays them and so, they are slightly biased, aren't they?
Whether this is indeed a fantastic deal so, you need to do your own due diligence and
establish for yourself whether it is indeed a really good deal.
So, let's start off with what is the true market value?
What is it really worth?
And I would encourage you to disregard the asking price here because the truth is, you
don't know who actually set that asking price, did you?
I would suggest that if the estate agent set the asking price, well it's probably quite
accurate.
But if the seller set it, well don't sellers always want the most amount of money they
can get for that property?
We need to look for accurate comparables and in particular, sold prices, not asking prices.
So, go to Rightmove, click here, looking at house prices and start to find a property
or two or three that closely resembles the one that you're looking at.
Also, ask the agents.
Build up some rapport and ask the agents.
Maybe not the one, if it's being sold through an agent, maybe not the one that's actually
selling the property but there's gonna be lots of other agents in the area.
Walk in and ask them.
Do you know what?
They will know what the accurate price is for that property in today's market.
Now, you need to consider what is the highest offer that you would be willing to make on
this particular property?
And we'll be going to negotiation, that is going to be your, "Never go beyond," figure.
Now, assuming that you're gonna rent this property out, let's talk about demand.
If it's an HMO, you need to go onto spare room and compare rooms for rent to rooms wanted.
If there was a massive oversupply of rooms in that area, well I would be reluctant to
actually invest if it's going to be an HMO ultimately.
You don't want to really invest in an area where there's a massive oversupply of rooms,
do you?
Even though I totally accept that if you got the right HMO in the right area and it's amazing,
you will of course rent that out all day long, it's still gonna be better in an area where
there's not an oversupply, of course it is.
And whilst you're there, by the way, look at what the average room price is.
Compare this now with other areas around the area that you're looking at, how does it compare?
Are there other areas that are close to the one that you're looking at where there isn't
an oversupply of rooms?
You know, if it's a house or a flat for example, on Rightmove, search firstly with the include
under offer box ticked and then search again with it unticked and that way, you can build
up an idea of how much demand is in the area.
I had a great little video on this, you might want to check that out, which will teach you
exactly how to do that.
Once again, you're then gonna want to compare that to areas that are around this one and
that video will show you exactly how to do it.
Next, we need to calculate return on investment.
This is obviously calculated as annual profit divided by the cash that you're investing
in the deal multiplied by 100.
That is return on investment.
And you need to factor in all of your costs here and I would encourage you to stress test
this at a higher interest rate so that if and when interest rates do go up, you know
you're still gonna be making some money and again, you want to compare this with other
areas that are around you.
Now, I did another little video on how to look at yield versus return on the investment,
I'd encourage you to check that one out because that's gonna give you quite a lot of information
as well.
I want to move onto now, local area.
Ask the estate agent, they will know all of the areas around the investment property that
you're actually looking at.
Is there a new development that's going in that's gonna have an impact on this price?
There may be a new local employer coming into the area, you know, providing a lot more jobs,
which is going to increase demand of course.
Is there maybe a crime ridden estate hidden around the back somewhere that maybe you're
not aware of?
Well, the estate agent will of course be aware of it.
I'd also encourage you to view this property at different times of the day, different times
of the evening, at the weekends.
This should really fall in part of your basic due diligence.
And if you're not familiar with it, check out streetcheck.co.uk.
It's a fantastic resource, you can learn about housing in the area, the type of people, employment
and even crime.
I did a great little video on that, you might want to check that out.
In my online property master class, I share my full due diligence process so you can quickly
work out when a property is in fact, a fantastic deal.
And so, if you'd like to book a 10 minute phone call with me to find out a little bit
more about this course and how it might benefit you, just click on the link here and I'll
be very happy to answer any questions you may have.