As 2012 is expected to see an increase in buy to let activity in the UK, the Royal Institution of Chartered Surveyors is recommending that private landlords should take care when buying older properties.
Low interest rates, high inflation, stable house prices and rising rents have combined to encourage another buy to let boom, it pointed out.
According to recent figures from the Council of Mortgage Lenders buy to let loans increased by 16% in the third quarter of the year and accounted for 12% of all house purchase loans.
The current shortage of housing stock, further compounded by fewer sellers in the market, has increased competition for the best properties meaning that landlords are increasing going for properties which need work.
RICS is warning that older properties could need a lot more than redecorating or a new bathroom. Private landlords need to know what they are buying in case they get a nasty surprise.
Typical building or structural faults include dry rot, blocked drains, rising damp, fractured support beams and subsidence. According to the Building Cost Information Service (BCIS), private landlords could end up paying tens of thousands to resolve faults. For a four bedroom house, a significant damp problem could cost anything up to £28,000 to repair and prevent from happening again, while subsidence could cost around £24,000 to correct.
‘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,’ said David Dalby, RICS director of residential.
‘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,’ he explained.
Landlords are advised to request a Condition Report, Homebuyer Survey and Valuation or a Building Survey from a RICS accredited surveyor before completing on a property.
The Condition Report provides a basic overview of the condition of the property, highlighting areas of major concern. Homebuyer Survey and Valuation is most suitable for properties that are in reasonable condition. It provides a concise report detailing any significant problems that could make a difference to the value of a property.
Building Surveys provide a detailed report on a property’s construction and condition, and is particularly useful if the property is dilapidated, has been extensively altered or if the landlord is planning a major conversion or renovation.
Condition Reports start from around £200, a Homebuyer Survey and Valuation will cost landlords around £400 with a Building Survey costing from £700.
‘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,’ explained Dalby.
‘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,’ he added.