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Landlords looking to increase their buy-to-let portfolio or hoping to move into the lucrative luxury letting market may be interested in buying repossessed properties at below market value. There are plenty of repossessions on the market through estate agents or at auction. Larger amounts of properties or blocks of apartment blocks can also be acquired through asset management companies. Because you’re buying at below the market value, you should, in theory, make money straightaway. The property may need some work, but once it is renovated, you should be able to get a decent rental yield.

As always, the first thing to look at is the location, to make sure it is a suitable property to rent out. Check the value of similar houses or apartments in the area and estimate the cost of renovation work. It is not such a bargain if you buy a property for £300,000, spend £25,000 on renovations and then find out that its resale value is only £325,000 maximum. On average, you can buy a property for around 30% less than its market value, so it should be a sound investment. You could always use the equity in the property to invest in other buy-to-lets, so it becomes self-funding.

Take a look around the property yourself to see what repairs are needed, work out the budget and then add about 10-20% for unseen setbacks. This could include vandalism or the property being completely gutted by the previous owners exacting revenge on being evicted from their home for non-payment of the mortgage. Also, make sure that the occupiers have actually left the building and handed in the keys. Get the locks changed as soon as possible to prevent them from re-entering the property after the sale too. Once you have possession, check the post to watch out for letters from debt collectors and give them a call to let them know the previous owners have moved, so they don’t send the bailiffs round.
The bank has to get the best price possible so you can still be gazumped after your offer has been accepted, until the contracts are exchanged. This means you could spend money on legal fees, searches and surveys without actually acquiring the property. If you are a cash buyer, this should be more of an attraction to the seller, so you can try to speed up the process. Make sure your solicitor is also being proactive in pushing things forward quickly.

There is also a good chance that the utility bills have not been paid, so you will need to get the electricity, gas and water supplies turned back on. You’ll need to find out who the suppliers are and how to get reconnected. This could be a job to outsource to your property management company or assistant, as it could take some time.

As always, it pays to research the area and the local housing market, and to instruct a good solicitor and have a thorough survey done on the property so you know what you are getting into.