Finding Investment Properties to Buy
Finding Investment Properties to Buy
Finding Investment Properties to buy; When searching for an investment property, it is essential to consider multiple factors before making a purchase. This section provides practical guidance on how to identify a suitable investment property, ensuring it aligns with your business needs and long-term goals.
1. Searching for an Investment Property to Buy
Finding the right investment property requires careful planning. Whether you conduct the search yourself or appoint a professional agent, it is crucial to identify a property that meets your immediate and future business requirements. An agent can assist with the acquisition process, although their services will incur a fee. However, this could be a worthwhile investment if you lack experience in purchasing investment properties.
Key factors to assess before selecting a property include:
- The type of investment property required.
- The impression the property will create for clients, customers, suppliers, and staff.
- Facilities, such as the number of bathrooms needed for staff and visitors.
- Space requirements for business activities, including the number of workstations and storage areas.
- Structural considerations, such as floor loading capacity for machinery.
- The suitability of the premises for daily operations, including accessibility features like lifts.
Methods to find an investment property include:
- Utilising the MOVEHUT investment property listings for the latest opportunities.
- Checking estate agents’ ‘For Sale’ signboards.
- Consulting investment estate agents.
- Engaging an investment surveyor for professional representation.
Seeking expert advice from a solicitor or a chartered surveyor can help determine whether a property suits your business objectives and complies with legal requirements.
2. Choosing the Right Location for Your Property and Business
Selecting an optimal location is critical when acquiring an investment property. The location influences the property’s suitability for business operations, clients, and employees.
Factors to Consider When Choosing a Location
- Transport & Accessibility – Is the property well-connected by public transport? Are there sufficient parking spaces available?
- Business Costs – Consider local authority charges, business rates, and congestion zones.
- Operational Restrictions – Some locations may have delivery time restrictions, noise limitations, or zoning regulations.
- Target Audience – Will the location attract passing trade? Is it near key suppliers or customers?
- Security Considerations – Certain businesses require discreet, secure premises for handling high-value goods.
- Load Capacity – If the business involves heavy machinery or storage, check the structural suitability of the premises.
Each location presents advantages and disadvantages. For example, a city-centre office may provide excellent accessibility but could be expensive, whereas an industrial estate may offer cost-effective space but limited public transport links.
3. Planning Permission and Use Classes When Buying an Investment Property
Investment properties in the UK are classified under the Town and Country Planning (Use Classes) Order 1987. Understanding the relevant use class of a property is essential before purchase.
Updated Use Class Categories:
| Use Class | Description |
|---|---|
| Class E | Commercial, business, and service premises, including shops, offices, cafes, and gyms. |
| Class F.1 | Learning and non-residential institutions, such as schools, libraries, and places of worship. |
| Class F.2 | Local community uses, including village halls and small essential shops. |
| B2 | General industrial use, excluding hazardous waste activities. |
| B8 | Storage and distribution centres. |
| C1-C4 | Various residential uses, including hotels, care homes, and shared housing. |
| Sui Generis | Unique uses, such as nightclubs, petrol stations, and betting shops. |
Permitted Development and Change of Use Some changes in use do not require full planning permission but may be subject to prior approval. For example:
- Class E to C3 (commercial to residential) is permitted under certain conditions.
- B2 to B8 (industrial to storage) is generally allowed if under 235 sq. m.
Checking whether planning permission is required should be part of the ‘Heads of Terms’ (HOTS) agreement before purchasing a property.
4. Costs Involved in Buying an Investment Property
Purchasing an investment property involves several costs beyond the sale price:
- Professional Fees – Surveyors charge between 0.5% and 3% of the purchase price, while solicitor fees range from 0.5% to 1.25%.
- Mortgage Costs – Investment mortgage terms vary from 1 to 30 years, with deposits typically between 20% and 30% of the property’s value.
- Business Rates – Based on the property’s rateable value, reviewed periodically by the Valuation Office Agency (VOA).
- Additional Costs – Include local authority charges, insurance, maintenance, and VAT where applicable.
- Stamp Duty Land Tax (SDLT) – Payable on most purchases (see SDLT section for current rates).
Purchasing an investment property involves several costs beyond the sale price:
- Professional Fees – Surveyors charge between 0.5% and 3% of the purchase price, while solicitor fees range from 0.5% to 1.25%.
- Mortgage Costs – Investment mortgage terms vary from 1 to 30 years, with deposits typically between 20% and 30% of the property’s value.
- Business Rates – Based on the property’s rateable value, reviewed periodically by the Valuation Office Agency (VOA).
- Additional Costs – Include local authority charges, insurance, maintenance, and VAT where applicable.
- Stamp Duty Land Tax (SDLT) – Payable on most purchases (see SDLT section for current rates).
5. Investment Property Mortgages
If financing your investment with a mortgage, key considerations include:
- Lender Selection – Banks and specialist mortgage brokers offer tailored financial solutions.
- Required Documentation – Business plans, financial statements, and credit history are typically required for approval.
- Loan Terms – Mortgages range from 1 to 30 years, with deposit requirements influencing interest rates.
- Fixed vs Variable Rates – Understanding the difference helps in selecting the right financial structure for your business.
6. Making an Offer on an Investment Property
Once you have identified the right investment property, you need to submit a formal offer to the seller. Offers are typically made in writing and submitted via the estate agent. The seller may accept, reject, or negotiate the offer.
- Ensure your offer reflects market value and any necessary renovations.
- Consider including contingencies, such as subject to financing or planning permission approval.
- If accepted, request that the property is taken off the market to avoid competing bids.
7. Buying an Investment Property – Drafting ‘Heads of Terms’ (HOTS)
A Heads of Terms (HOTS) document outlines the main terms agreed upon before the final contract. It helps both parties avoid misunderstandings and ensures transparency in the transaction.
Key elements of HOTS include:
- Purchase price and payment terms.
- Timeline for completion.
- Any conditions, such as planning permission requirements.
- Legal and financial obligations for both parties.
While not legally binding, HOTS serve as an essential guide for the final contract.
8. Exchange of Contracts and Completion
After the HOTS are agreed upon, the next step is the exchange of contracts. At this point, the deal becomes legally binding, and both parties must follow through with the agreed terms.
- Deposit Payment – Typically 10% of the purchase price is paid at this stage.
- Legal Checks – Your solicitor will confirm title deeds, business rates, and lease terms if applicable.
- Completion – The final balance is paid, and ownership is transferred.
Following completion, ensure you:
- Register the property with the Land Registry.
- Arrange appropriate insurance coverage.
- Update business rates with the local authority.
- Transfer utility accounts to your name.
This guide ensures you have a clear roadmap for acquiring an investment property in the UK, optimised for your business success.
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Disclaimer:
The Content above is for guidance purpose only. While we make every effort to keep the information current and correct, we do not make representations of any kind. Professional advice should be sought, before entering into any legal contract and purchasing a property.