A recent study by the Council of Mortgage Lenders (CML) has revealed another boost in the buy-to-let market.
Low interest rates, high inflation, rising rents, and stable house prices have combined to increase buy-to-let loans by 16% in the third quarter of the year. These also accounted for 12% of all house purchase loans.
With the current lack of housing stock, accentuated by fewer sellers on the market, there has been increased competition for high quality homes. This has led landlords to go for properties that may need work.
The Royal Institution of Chartered Surveyors (RICS) has warned that older properties could potentially need more work than just redecoration or a new bathroom. It is important for private landlords to know what they are buying into before purchasing, to avoid nasty surprises.
Typical building or structural faults that could creep up on landlords could include dry rot, rising damp, blocked drains, fractured support beams, or subsidence.
RICS Warn BTL Landlords of Older Properties
To resolve faults, private landlords could end up paying tens of thousands of pounds, say the Building Cost Information Service (BCIS). In a four-bedroom house, a substantial damp problem could cost up to £28,000 to repair the problem and prevent it from happening again, while subsidence can cost £24,000 to correct.
RICS’ Director of Residential, David Dalby, says: “Landlords could be without a tenant for several months while repairs are being carried out, and it could be even longer if subsidence is discovered.”
He also explains the difficulty in finding problems: “Estate agents act for the seller and will not be able to advise purchasers on possible defects, and most of the time will be unaware of any issues with the property anyway. We are warning private landlords to know what they are buying and are advising agents to recommend surveys to all their clients.”
Before finalising on a property, landlords are advised to request a Condition Report, Homebuyer Survey and Valuation, or a Building Survey from a RICS accredited surveyor.
A Condition Report will provide a basic overview on the condition of the property, and highlight areas of major concern.
The Homebuyer Survey and Valuation is most appropriate for properties in a reasonable condition. It provides a succinct report that details any significant problems that could potentially make a difference to the property’s value.
Building Surveys deliver a detailed report on the property’s construction and condition, and is beneficial if the property is rundown, has been significantly altered, or if the landlord plans to majorly convert or renovate the house.
A Condition Report starts from about £200; a Homebuyer Survey and Valuation costs around £400; and a Building Survey costs from £700.
Dalby says: “The cost of a survey is a small price to pay for peace of mind and will prevent landlords from being hit with unforeseen costs. Surveys can even be used to negotiate the sale price if any significant faults are discovered. Landlords who show surveys to insurers are also likely to benefit from lower buildings insurance premiums.
“RICS surveyors are closely regulated and are required to have professional indemnity insurance, which helps to protect landlords if the surveyor fails to detect a fault which later becomes apparent.” 1