Rent Assesment Report - BTL

ziof3ster

Hi,

doesn anyone know how the lenders's surveyor create this report?

Is this based on the avarage rent for a property same size, area/street?

Is based on the conditions also? (this makes difference as there are lenders as TMW that have "light refurbishment mortgage" and RBS/Natwest not).

The assessment can be much different before and after a make up (repainted/new kitchen/new bathroom etc). This report is very important for the lending criteria (because of 125% rule), so I'm trying to understand before go with a lender (much lower rates, bigger fees) or another one (low rates and decent fees).

Any help will be very much appreciate.

Thanks
Gio

holly_hobby

The surveyor as part of the valuation report will obtain comparibles for same/similar props in immediate area, and generally use the mean in assessing the market rental value of the property.

If the property needs any upgrading/tidying up this will have a negative effect on the estimated rent.

If its of far superior quality than any other available comparible, (and bearing in mind current market conditions) the achieveable rental income may be set at the top end of other compariables recd (it would have to be pretty special and unique to break the current ceiling of the area), rather than using the mean of those assessed.

I would also suggest, that if the rental assessment comes in at less than 125% you walk away, as there clearly won't be enough profit margin to make this a successful longterm venture.

Hope this helps

Holly

ziof3ster

holly_hobby wrote: »

The surveyor as part of the valuation report will obtain comparibles for same/similar props in immediate area, and generally use the mean in assessing the market rental value of the property.

If the property needs any upgrading/tidying up this will have a negative effect on the estimated rent.

If its of far superior quality than any other available comparible, (and bearing in mind current market conditions) the achieveable rental income may be set at the top end of other compariables recd (it would have to be pretty special and unique to break the current ceiling of the area), rather than using the mean of those assessed.

I would also suggest, that if the rental assessment comes in at less than 125% you walk away, as there clearly won't be enough profit margin to make this a successful longterm venture.

Hope this helps

Holly

Hi Holly,

thanks you very much for the answer!

In my case, as the property is now, definetely needs modernization.

In the same block, same size property in a normal state (so not after a good makup that I'm willing to do) makes 3 times the mortgage rate!!!

Just to make a numerical example (very close to reality).

Mortgage rate will be 500pcm
Rent for property same block around 1200pcm
Rent prospected after makeover around 1500pcm
Rent as it is now...dont really know (a man lived here for 20 years and never updated anything).

I've done all the researches myself on this area (I live here and own another property). This is a central london flat.

I'm very interested in the property and done an offer that has been accepted, but I'm worried about this survey.

If I ask the agency that is selling, can I trust them rent assessment report? (of course they are selling so dont know if could be a realistic one).

Also, is the rent assessment based on furnished o unfurnished flat?

Thanks
Gio

Thrugelmir

ziof3ster wrote: »

Is based on the conditions also? (this makes difference as there are lenders as TMW that have "light refurbishment mortgage" and RBS/Natwest not).

TMW will impose a retention on the mortgage advance. Providing the scheduled works are undertaken within 3 months the monies will be released.

So the property at the outset will be valued as if it was in immediately lettable condition. The retention being the stick to ensure the work is completed.

ziof3ster

Thrugelmir wrote: »

TMW will impose a retention on the mortgage advance. Providing the scheduled works are undertaken within 3 months the monies will be released.

So the property at the outset will be valued as if it was in immediately lettable condition. The retention being the stick to ensure the work is completed.

Yes I've seen the TMW product, but is on a LTV of 65% that really doenst work for me, when I prefer take a 75% one and do all the works by myself in short time. Of course in this case the potential rent will be lower and the very low rates of TMW are more attractive for the 125%.

But let say another lender doesnt have this "light refurbishment one".
Is the assessment based on the property as it is or on the potential given the statistics for the block/area. These other lenders dont have a "light refurbishment" product so no point for them to push for one of this products.

Thanks
Gio

Thrugelmir

ziof3ster wrote: »

But let say another lender doesnt have this "light refurbishment one".
Is the assessment based on the property as it is or on the potential given the statistics for the block/area. These other lenders dont have a "light refurbishment" product so no point for them to push for one of this products.

Thanks
Gio

Lenders don't lend on potential. Properties will have a given rental band depending on market rates.

All property will be subject to a retention if one is required. The TMW mortgage merely allows investors time to bring a property up into lettable condition. In that the retention can be up to £25k. Not an insignificant sum.

holly_hobby

As stated in my initial post - rental assessment by the surveyor will be based on current condition (with a rentention if the property is not deemed as habitable/in sufficient condition to be let).

BEFORE you go any further, you need to get some guidance for your own reference, as to what local estate agents believe (both in current condition, and post proposed upgrading), what will be an achieveable rent in the current market.

As you may find that their informed figures fall far short of your anticipated returns.

Hope this helps

Holly

ziof3ster

Holly and Thrugelmir,

you clarified my doubts! Thanks a lot for your help!

Ciao!
Gio

ziof3ster

Another option.

Let say that one of my lodgers (I've got 2 at the moment) wanna see the property that i'm buying (before I have the valuation) and we agree for a rent that is over the 125% of my mortgage rate to be.

I have the rent assessment, and for as it is, this valuation is not enough for the 125%.

Also, the agency selling the place writes down that, according with the market on the area, they have got all the reasons (and maybe some property rented there) at a rent well over the 125%.

What happens in this case? Is an agreement in principal by a person willing to take the place (for over the 125%) and a written declaration by the agent be enough for the rent assessment report?

Thanks
Gio

GMS

Valuers assessment stands. You could get a 6 month AST in place for £5000 per month which would never be renewed (extreme example) Does not mean the property will rent for that amount.

ziof3ster

GMS wrote: »

Valuers assessment stands. You could get a 6 month AST in place for £5000 per month which would never be renewed (extreme example) Does not mean the property will rent for that amount.

True,

but will give evidence (and time and money) to renew everything to a standard that matches the market for a place that size in that area.

Am I wrong?

Sorry if I insist, but I've noticed that, according with your experts comments, the bank will assess the rent based on the "as it is" value.
If I find someone happy to pay from the begin the market rate (or just over the 125%), even if he leave, I will be able to renovate and make it in a perfect state in line with the market rates.

thanks
Gio