UK Property Buying Process
The buying process for purchase of investment property is similar to that of purchasing ‘own use’ property from third party sellers, but is simpler and can be completed in a shorter timescale. Please read the 10 steps below or watch the video at the bottom of this page or Section 4 of the Main Video on our home page which explains these 10 steps in detail.
Buying Investment Property
The process for the Investment Properties is simpler as there are no third parties involved and the rental and management of the property does not change as it continues to be managed and rented out by us or our partner companies. There is no mortgage lender involved. The prices are fixed in-line with the market and rental yield, (but also adjusted if needed on a specific property, according to its subcategory, after taking location and local rental yield into account – such that all properties offered for selection represent equal investment value). Clients could select any they like and their investment return will be proportional to price. A prior reservation agreement provides security and certainty for us and for you in the purchase process. Thus the process is quicker and the buyer starts getting guaranteed rent 1 month after Purchase Completion.
Here are the steps involved:-
STEP 1. Make Enquiry & Get Information
Watch the Main Video on the Home Page, Complete an Enquiry Form with your email and details and get further information.
STEP 2. Discuss Your Needs
Our staff will email you information (check your spam or junk folder) and can call you to discuss your needs. Is investment property in the UK right for you or not? We aim to provide you with good honest advice and will tell you if such a property will not meet your needs. You can make a provisional decision on type of property e.g. Type H3. This can be changed later, at time of property seelction in step 7.
STEP 3. Provide Ownership and ID information
First you need to decide if property to be purchased is by a single owner or multiple owners, or company. If multiple owners (e.g. husband and wife) you will also need to consider the type of joint ownership. Most investors go for single person ownership as this keeps things simple. You can amend this later before property selection.
Your ID information will be required BEFORE we can start dealing with you or showing you any property sheets or provide official quotes or draft agreements. This is a regulatory requirement in the UK and some overseas buyers do not appreciate this. You can scan and email this information to us. We are required by Law to keep all such information confidential. The ID information required will be:-
- Passport copy (photo page)
- Address ID e.g. Driving Licence, ID Card, Utility Bill or Bank /Credit card statement showing your address.
Once we have your ID information, we can provide more specific details and a draft Reservation Agreement and clearly layout how the purchase process will proceed in your particular case. Clients normally make a reservation of the most popular H3 Type first. At property selection they can upgrade or downgrade to other types from the entire list. Getting a reservation agreement does NOT oblige you to any purchase – It just provides full information before the video meeting.
STEP 4. Arrange Video Meeting
Prior to Covid, many investors would visit us – normally prior to reservation. This allowed us to meet them at our offices and show them our operations and answer all of their questions directly. Now we are finding that a good Zoom Video Meeting achieves 90% of the benefits of a visit and provides much more convenience.
After you have received the reservation agreement we can arrange a video meeting with a Senior Consultant of up to 1 hour. Many meetings are with Dr Tariq who can advise clients and answer all questions. He can explain how we work and the details of the buying process. Let us know best times for the meeting and we will send you a Zoom Video Link. You can click the link and see us. It is best to arrange the meeting after you have received the agreement. At the meeeting you can ask any questions and we can also advise on who should own the property (single, joint, company) and cover all of your conerns. If you wish to visit, then this can be discussed and arranged after the Video Meeting. The visit is just to provide you with additional confidence and is not normally needed as the video meeting covers everything. You will not be able to select a specific property at any visit – see below. Selection is in reservation date order and done via Property Sheets in step 7.
STEP 5. Make Reservation
After the Video Meeting, once you are happy to proceed, make the reservation by signing and scanning back the agreement. The property type in the agreement is provisional and can be changed later, after specific property selection. Your reservation payment is £3,000 and remains in the client account until property transfer. Reservation means that you have certainty of purchase (of any property from the range), a fixed timeline, fixed price, and priority access to the list – as demand is higher than supply. Reservation also allows us to get all of your ID documents attested and ready so that completion can occur immediately after selection. The purchase process starts when you make the reservation. Demand is higher than supply and we do not wish clients to make a reservation until they are confident that what we are offering is what they want.
STEP 6. Property Option Sheets
Due to demand outstripping supply, there is on average, a 6-week lead time between reservation and specific property selection. Depending on supply this may be shorter or longer. We constantly have about 60 clients in the pipeline who have reserved and around 10 to 12 houses are selected each week, this amounts to a lead time of about 6 weeks.
When it comes to your turn, we give you maximum choice and present around 20 Property Options Sheets for you to select a specific property. These will include the entire range of properties available that week -not just the category reserved – so you can downgrade and upgrade as per your budget and preferences. There are also subtypes which are slightly cheaper or more expensive than the main types, depending on their location, value and rent. Each sheet outlines the location maps, street address, pictures, floorplans and details of each specific property. Within each category (e.g. H3) the properties are very similar indeed. We do our very best to price all of them proportional to their value, rent, location and future potential – so you can select any you like, and the risk of selecting a poor property is minimized. You can select any from the list that meets your budget and preferences, and you will be fine.
Before selection ensure that your attested ID documents and 3 months bank statements showing source of funds have been returned. UK Residents can get passport copy and address ID certified at the Post Office and copies scanned to us. Overseas clients can use any lawyer or Notary to complete the confirmation of ID form (which we will send to you with instructions after reservation) and also provide the lawyer’s details.
Under Money Laundering (AML) rules, all property buyers must prove the source of funds. The easiest way to do this is to ensure all required funds are in your bank account around 3 months prior to the final payment. (Generally, funds that have been present in your account for 3 month are assumed by authorities to belong to you.). In such a case, 3 months of bank statement (these can be online statements and do not need to be certified) can be provided before the final payment is made from that same account. If, however, there are any large payments into the bank account in the 3 month period, which will be used towards the property purchase, these will need to be explained (e.g. inheritance, property sale, loan, salary, bonus, share sale) or bank statement of the source of the funds (e.g. your other bank account from where funds were transferred) may be needed before you make the final payment. If any such large payments have been gifted to you during the 3 months period, then a gift letter will be needed (we can draft this) and bank statement and ID of the gift donor will be required. If you provide 3 months of bank statements prior to final payment, and the whole funds required for the final payment are shown as being present at the start of the statements, then further evidence is not normally needed. Any cash deposits into your bank account cannot be accepted towards UK property purchase as the source of these is hard to prove.
STEP 7. Select Specific Property
Study the Property Options Sheets which will be in ascending price order. Take your own preferences into account for budget, looks and location; and select a specific property you like. No matter which you select, your investment returns will be proportional to the set price. The others from your selection list will be released to other clients. If selected property is still under renovation, we undertake in the agreement, to renovate to the set standard. Your Guaranteed Rent will still start 1 month after purchase completion date – even if renovation or rental is delayed for any reason.
As the properties in the list may already be rented or be located all over the North, 100’s of miles apart, it is not practical to make visits during the selection process. This system works well for clients and is very efficient. During the Covid Pandemic, over a period of 15 months, we sold over 400 houses without a single property viewing and all of our clients were satisfied with their selections. As the properties are guaranteed and will be maintained in a good rentable condition at our cost, viewings do not add any value, and we will provide post-renovation pictures instead of viewing.
If clients are unable to make a selection, they can wait until the next batch of properties. Over 90% of clients select on the first batch, the rest select on second batch about 6 weeks later. Only once a client is 100% happy with the selected property does it get transferred to them.
After selection the agreement is amended to the selected property type and pricing and the final payment worked out. Then clients can make the final payment, normally to the same client account as the reservation payment or if they wish, direct to the solicitors client account. Payments made to client accounts legally belong to clients until they become owner, and can not be used by the company or solicitors for any other purpose.
STEP 8. Property Transfer & Ownership Documents
We follow the “Facilitated Buying Process” (see main video) and normally act on your behalf to ensure all the steps are taken to legal completion of the property purchase after your full payment.
Local external independent Law Society Solicitors act for buyer, do searches, check titles, complete purchase, & register under buyer’s name at UK Land Registry. Satisfactory completion of this process is also guaranteed by us. Completion is normally about 4 weeks after property selection (if all documents including bank statements and final payment ready). Under UK Law you become legal owner on the Completion Date. Registration takes longer and is normally a few months after completion – although due to covid backlogs, it has been taking longer. Prior to completion all of your client account funds including the reservation payment go to the solicitors client account. Our companies only recieve the funds and can use them, after you become legal owner – after Purchase Completion.
Following completion, you get a completion summary from the Solicitors and then the property is registered under your name at the UK Land Registry by your solicitor and the solicitor will provide evidence for this after registration. We will ensure all documents are sent to you. You can also check your ownership directly with the Land Registry which maintains and on-line register.
STEP 9. Post Completion & Guaranteed Rent
Rent starts 1 month after Completion Date and is paid into the owners own bank account at the end of each calendar quarter (31 March, 30 June, 30 Sept, 31 Dec)
Bank Details: We get your bank details (UK or Overseas) on a special form after completion & pay rent at end of each calendar quarter
HMRC Application: If you are resident overseas, we register you with HMRC as non-resident landlord. This registration service is free of charge. We complete the application and send for you to check, amend, sign and return. It may take several months to get the HMRC non-resident landlord (NRL) reference number due to Covid backlogs. If there is delay in getting this, your first rent payment may be delayed until we get the NRL number, but the amount you get will not be affected. After this NRL number is issued, HMRC will also normally issue a UTR number and you will need to do a tax return the followign tax year. You can do this yourself online but we also have an optional tax filing service that can do this on your behalf each year. About 50% of our clients do it themselves each year and rest use our optional tax filing service.
Net Guaranteed Rent System: You are the passive owner. Under our agreement you effectively rent the properyt to us. We are effectively your tenants and agree to pay guaranteed net rent at 6% of property price per year and manage and maintain the property at our cost. We then act as the Landlrod of the proeprty and rent out to our own tenants. We do everything. You do nothing, and get passive income for the long term.
STEP 10. After Purchase Services
Most clients want to keep properties for long term. We are set up to provide services for 20+ years and longer and our clients really like our hassle free service. 70% of our sales each month are linked to our existing clients. However, you do have the option, after the first 3 years, to give us 6 months notice, if you wish, and then the tenant will be moved to one of our nearby properties and the property will be handed back to you in a good rentable condition. After this you can live in your property, rent it out, use any agent or re-sell the property. Thus the agreement continues unless you give notice to cancel. Over the past 15 years, very few clients have given us notice to live in or resell their property, and so far, (as at Oct 2022,) no-one has given us notice to move to another agency. We cannot take back a property once a notice has been given. We have never given any client notice and we do not intend to do so.
Long-term Guaranteed Rent: Net Guaranteed Rent System continues after the 3 years & rents are reviewed at the end of each calendar year after the initial 3 year period. There are many costs in long-term property management and we pay for ALL of these including re-renovations each time the tenants move and upgrades to EPC whenever these are required. The baseline net guaranteed rent is 5% of original property price and is fixed for 3 years and then rises in line with official rent inflation at end of each calendar year (1st of January). However, you also get an extra 1% (so you get 6%) for the first 3 years as our costs are less because the properties are freshly renovated at the beginning. Then for a few months until the end of December it will be at 5% rate before increasing. Each annual increase after the first 3 years will depend on how rents have grown in the market the previous 12 months. For examply, if rents increased by 4% then your rent will increaese by 4%. Overall, considering all the services we provide, this net guaranteed rent system provides better net rent than you would get using normal letting agents over the long-term. We have been using it for over 15 years and our clients really like it.
UK Will Service: You can decide who will own your property after you. E.g. Children – We provide a free simple UK Will template for you to complete the Will and lodge a copy with us.
Annual Tax Filing Service: We are official HMRC Tax Agent and can provide this. Most clients inc. overseas nationals have the UK Personal allowance of £12,570 – so annual rental income below this is effectively tax free. But tax filings still need to be made each year if you own a UK investment property.
Open Non-Resident UK Bank Account: We can provide reference letters after property is registered to help you do this. Owning a property in the UK is a valid reason to open a non-resident bank account in order to deposit your rent. However, you may need to go physically to a branch with your ID and documents in order to do this and some branches make it hard for clients. UK bank account is not essential as rent can be sent to any of your overseas bank accounts. With your permission, it can also be paid to a first degree family member. (We will need the ID and bank statement of the family member, prior to any payments).
Future Resale: You can resell easily in the future and we can also buy back at the market price. However, you should NOT buy, if you wish to resell quickly e.g. within 2 or 3 years as you will not make much profit.
VIDEO – 10 STEPS IN THE PROPERTY BUYING PROCESS
This video covers ALL of the practical steps above in details. Please watch it in full as this is the process we will follow. The content in this video is similar to Section 4 of the Main Property Video
Buying Own Use Property
Buying own use property from third parties follows a more traditional process that can stretch to an average time period of about 3 to 4 months. The third party may have to purchase a house before completion can occur. There is also more uncertainty regarding completion as there is no pre-agreement equivalent of the reservation agreement. Theoretically the buyer can pull out at any time before completion of contracts but this does not happen often.
If you are resident in the UK, a mortgage lender may also be involved and would result in additional steps in the purchase process. As prices of such property is likely to be higher, UK stamp duty charge may also be payable.
Please note that we no longer sell properties for immediate own use. We sell investment properties only. All of the houses we sell are already rented out to good long-term tenants and must remain so for at least the first 3 years. Even after this, our clients normally continue with the same system. However, you can of course give us notice if you wish, and we can move the tenants to another of our properties after the 3 years. Then you can take possession of your property and use it for your own use.
If you need a property for immediate own use, then our service is not suitable for you (as all of our properties are rented out for at least first 3 years). It is best to use the “open market” and use normal local estate agents in the area you wish to live in. This will enable you to see a wide range of houses in your desired location and enable you to select one that is most suited to your own personal needs.