Investing in a below market value property (BMV) for the purposes of renting is a great way to take advantage of the current dip in housing values and stable rent economy. While some people assume that a BMV property is in poor condition or located in an undesirable area, this is not always the case. Due to circumstances such as job changes and family issues, many people living in prime properties are motivated to sell them quickly; even if that means they must take a 20-50% cut in value. If you are interested in finding a BMV to begin renting out, here are some tips to get you started:
- Speak with a letting agent about the property you are interested in. They will be able to give you a good idea as to whether or not it is in a good renting area and what type of tenants it will attract. You will want to make sure that there will be a demand for renting in that area and that you will have a reliable pool of tenants that you have experience managing.
- Check the local zoning ordinances to make sure that any additions or other alterations you may want to make will be permitted. Many buildings have occupancy thresholds and construction zoning laws that you must obey. Planning consent can sometimes be difficult to obtain and may not be worth the trouble if it is needed on the property you plan to buy.
- Have a survey performed on the property. This should check for structural damage, health-related issues like asbestos and lead paint, and energy efficiency. Some owners who are trying for a quick sell will attempt to hide issues with the property, so it is important to have a professional confirm that the building is in good repair before you purchase.
It is easy to overlook the importance of energy efficiency in a BMV property. If it has a low rating, consider how much it will cost you to replace windows, insulation, heating systems, or roofing. A poor energy rating can cut into your profits or deter potential tenants. It can also hurt resale value if you should sell the property in the future. Beginning in 2018, properties with the lowest energy grades will not be permitted to be rented out at all, so it is imperative that you invest in an energy efficient property.