Making the Best Deal with Property Investors

The housing market is balanced on a fine point as mortgage costs continue to soar and property experts predict a slump in house prices. 

Investment companies prowl the country for cheap properties, but are their offers a good deal for buy-to-let landlords?

This guide explains how the investment market works and lists tips to help you get the best deal.

Who are the property investors?

Property investors work in a competitive market alongside many rivals striving to add to their rental property portfolios.

They benefit from economies of scale like central administration to handle rent collection, repairs and other tenant issues.

Some only operate at a local level, although many offer national coverage.

Investors can come in many guises, but the most popular is a company that holds properties to rent out.

Some companies flip property - buying in as cheaply as possible to immediately sell to other investors at a profit.

It’s easy to find property companies willing to consider buying rental homes in your area - search Google with keywords like ‘sell house to investor’. The search returns pages of willing buyers.

Why sell to an investor?

Sellers have many good reasons for dealing with property investors, but the one that leads to the most issues is the price - scroll down for more information about prices.

Purchased ‘as seen’ - Property investors are unlikely to have too many concerns about the state of a home they are buying. While private buyers who want to live in a house want the perfect home, investors view the deal as a business decision and are unlikely to worry about the need for maintenance.

Cash deal - No uncertainty is involved as no chain is holding back completion. Investors will not have a mortgage or wait for lenders to pore through their finances to agree on a purchase. Sellers are paid by bank transfer.

Fast completion - On average, completion with an investor is in two to three weeks.

Investors pay the fees - In most cases, investors will pay the add-ons, like legal costs and valuations, while selling direct means no estate agent or auction fees.

Escaping financial troubles -  Selling to an investor should be fast and problem free, especially for landlords struggling to pay mortgages.

Inherited homes - Investors will buy inherited homes that need updating or even major renovation

How much will they pay for a home?

The million-pound question for landlords is how much will an investment company pay for a home?

Brace yourself because any investor will seek a discount to sweeten the deal.

The discount depends on several factors, like the type of property, location, and how much refurb work is needed.

Discount offers can range from 50 per cent to 85 per cent of open market values. The cash an investor will offer is likely much lower than a seller will pick up from a private sale through an estate agent.

A quick sale to an investor can save several thousand pounds in fees and hidden expenses.

Hidden expenses can soon mount up. These include monthly mortgage costs, council tax and utilities on an empty rental over the time the property is on the market.

What to watch for when striking a deal

Selling to an investor can sound too good to be true, and the path to completion has several pitfalls that can snare a seller.

Legal fees - The buyer generally offers to cover all costs, but sellers should pay for independent legal advice to protect their interests

Last-minute price changes - Some buyers let a deal almost get to completion and then change the conditions. Often this means reducing the price at the last minute to complete.

Look for multiple offers - Ring around three or four firms to get a feel for the market and determine how much you will likely get.

Lock-in scams are agreements to sell to a specific buyer that stop sellers from proceeding with an alternative sale.

Option deals - Option deals give a buyer a chance to sell on an interest in your property from under your feet and are rarely beneficial to the seller.

Is dealing with an investor risky?

Dealing with an investor comes with no more risk than accepting an offer from a buyer working with an estate agent.

Other buyers are just as likely to drop out, slow the deal or attempt to renegotiate the price before completion.

If you sell to an investment company, have an independent lawyer check any contracts before signing.

View Related Handbook Page

Investing in a Property

Investing in a private rented property can be achieved in a variety of ways. Sometimes landlords inherit a property that they then turn over to renting. Sometimes owners of properties become unintentional landlords because they are unable or unwilling to sell a property at the value the market currently dictates.