Valuation on purchase of already-let property

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    Valuation on purchase of already-let property

    Hi everybody,

    I have been offered a property to buy which is already tennanted. My question is -

    Is the valuation of the property the same as it would be on the open market? My guess is that it would be lower, but as a novice LL that's all it is - a guess.

    I have a meeting with the guy who wants to sell, today, so any help with this will be appreciated.
    Swampduck

    #2
    The valuation would be lower generally speaking.
    Unshackled by the chains of idle vanity, A modest manatee, that's me

    Comment


      #3
      Is there a general (unwritten) rule as to how much lower? - 5%, 10%, 20%?
      Swampduck

      Comment


        #4
        Woah!

        The answer depends entirely on what sort of tenant this is! If it's a recent tenancy - a normal shorthold tenancy - then I wouldn't have expected much reduction in value. If the property is being as sold as an investment property, then why should it - you could even argue that having a sitting tenant is a bonus as it avoids any initial void period plus the costs of sourcing a tenant; plus it means that any work that the new landlord might wish to carry out on the property is likely to be tax deductible from rent income, whereas it wouldn't be if the new LL carried it out before he takes on his first tenant.

        However, if this is a Rent Act tenant who's been living there donkey's years, it would be an entirely different matter - he would have lifetime right of residency and his heirs could even inherit the tenancy. So in that case the value would be very markedly reduced - haven't a clue how much but guessing less more than half?

        So now you know the first question to ask the vendor...

        Comment


          #5
          Investment Property

          If you have a property with a sitting tenant (let under the old Rent Act rules with long-term security of tenure) then yes, the value of the property is considerably affected.
          However, with the assured shorthold tenancy the tenant has 6 months security at most, therefore the value of the property when sold as an investment is not affected.
          In fact, it could be argued, the value could be enhanced, as it is being sold with an establised income stream and a good tenant.
          As the Buy to Let market matures there's bound to be more trade and more demand for properties as investments. Once people get used to the idea of buying residential property with tenants, just as the commercial market operates now, people will appreaciate this added value.

          Comment


            #6
            Originally posted by Editor View Post
            If you have a property with a sitting tenant (let under the old Rent Act rules with long-term security of tenure) then yes, the value of the property is considerably affected.
            However, with the assured shorthold tenancy the tenant has 6 months security at most, therefore the value of the property when sold as an investment is not affected.
            In fact, it could be argued, the value could be enhanced, as it is being sold with an establised income stream and a good tenant.
            As the Buy to Let market matures there's bound to be more trade and more demand for properties as investments. Once people get used to the idea of buying residential property with tenants, just as the commercial market operates now, people will appreaciate this added value.
            Yes. In fact, rather than buying and keeping BTL properties, why not buy/let/resell at once? The subsequent purchaser then has only minimal setting-up paperwork and no void peiod of tenant-hunting!
            JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
            1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
            2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
            3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
            4. *- Contact info: click on my name (blue-highlight link).

            Comment


              #7
              The tenant has a 12 month AST from Jan 07, also they are claiming HB which is being paid to the present LL with a top up. Tenants have said that they wish to stay in the property as they have children at the local school. The present LL though is letting this property without permission and I do know that his mortgage is with a sub-prime lender, and he is desperate to get rid of it as he is currently around 3k in arrears with mort payments. (What's he been doing with the rent - my guess - the local pub). Also the property although habitable is not done to the standard I would refurbish to.

              As this would be my 2nd property - does this sound like a deal any of you would consider if the figures worked?
              Swampduck

              Comment


                #8
                Originally posted by jeffrey View Post
                Yes. In fact, rather than buying and keeping BTL properties, why not buy/let/resell at once? The subsequent purchaser then has only minimal setting-up paperwork and no void peiod of tenant-hunting!

                GOTCHA!!!

                J

                PS. Many apologies for the intrusion on your thread swampduck.

                Comment


                  #9
                  Originally posted by jeffrey View Post
                  Yes. In fact, rather than buying and keeping BTL properties, why not buy/let/resell at once? The subsequent purchaser then has only minimal setting-up paperwork and no void peiod of tenant-hunting!
                  In fact, I bought a flat with a sitting tenant last year. He'd been there for four years with a string of six-month ASTs, and was clearly looking after the place, so I was pleased to take it.
                  However, I don't think it's so convenient for the vendor, who has to keep makign arrangements for viewings in consultation with the tenant.

                  Comment


                    #10
                    Originally posted by Harry View Post
                    In fact, I bought a flat with a sitting tenant last year. He'd been there for four years with a string of six-month ASTs, and was clearly looking after the place, so I was pleased to take it.
                    However, I don't think it's so convenient for the vendor, who has to keep makign arrangements for viewings in consultation with the tenant.
                    Agreed, so let P pay extra for V's arrangements which save P a lot of hassle.
                    JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                    1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                    2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                    3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                    4. *- Contact info: click on my name (blue-highlight link).

                    Comment


                      #11
                      I think it is absolutely true that a buy to let investor will have no problem buying with an AST tenant - I have made an offer at a property only recently with exactly this situation. However you are limiting your buyers to buy to let investors - those with no experience will run a mile from a tenant, thinking that they will never get them out and that there will be all sorts of problems. The limited market will therefore probably lead to a lower sale price, unless the property is extremely desirable. That is the situation up here in t' north - down in "that London" it is probably different!
                      Unshackled by the chains of idle vanity, A modest manatee, that's me

                      Comment

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