Before committing to an investment property purchase, work through this comprehensive checklist to avoid costly mistakes.
Purchasing an investment property is a significant financial commitment that deserves thorough due diligence. This checklist is designed to help you avoid the common mistakes that cost landlords money and cause headaches.
Financial checks
□ Calculate the realistic gross yield (annual rent divided by purchase price) and compare to alternatives.
□ Calculate the estimated net yield after all costs: management fees or your time cost, maintenance allowance (1-2% of property value per year is a reasonable estimate), void allowance (2-4 weeks per year), insurance, and any service charges.
□ Confirm your borrowing costs. Get a mortgage agreement in principle before making an offer. Calculate whether the rent comfortably covers your mortgage at the lender's stress rate.
□ Calculate total purchase costs: purchase price plus Stamp Duty (including the buy-to-let surcharge), legal fees, survey costs, any refurbishment needed, and initial letting costs.
□ Check service charges and ground rent for leasehold properties — these can significantly affect yield calculations and may increase substantially.
Property condition checks
□ Commission a HomeBuyer Survey or Full Structural Survey (for older properties). Don't rely on the basic mortgage valuation.
□ Check the roof and guttering condition externally.
□ Check for signs of damp, condensation or water ingress in all rooms.
□ Check the boiler age and condition. A boiler over 10 years old may need replacement within your holding period.
□ Check the electrical consumer unit — older fuse boxes with ceramic fuses indicate old wiring and may require an expensive rewiring.
□ Check the EPC rating. Properties rated F or G require significant investment to reach the legal minimum of E (and may need to reach C in coming years).
□ For HMO properties, check room sizes against minimum standards (6.51sqm for single, 10.22sqm for double).
Legal and compliance checks
□ For leasehold properties, check the remaining lease length (below 80 years creates significant issues for mortgaging and selling).
□ Check the title for any restrictive covenants that might prevent letting, subletting or HMO use.
□ Check planning history — has the property been subject to any enforcement action? Are there permitted development rights available?
□ For HMO properties, confirm the property is in an area where planning permission is or isn't required for HMO use.
□ Check the local authority's HMO licensing requirements if the property will be used as an HMO.
Location and demand checks
□ Research comparable rental properties — what is actually achieving in rent for similar properties nearby? Be sceptical of optimistic projections.
□ Check transport links and journey times to major employment centres.
□ Walk the area at different times — day and evening — to get a realistic sense of it.
□ Research the local employment base. Is demand for rental housing driven by stable, diverse employment or by a single major employer?
□ Check for proposed nearby developments that might affect the property's environment or rental demand (new amenities are positive; planned new roads or commercial developments less so).
Management considerations
□ Have a clear plan for how the property will be managed before you buy. Will you self-manage or use professional management?
□ If using a management company, speak to them before buying — they can advise on rental prospects and local demand.
□ Contact Arete Lettings on 01268 944120 before purchasing in any of our operating areas — we'll give you an honest assessment of rental prospects and the guaranteed rent figure we'd offer.