Experienced landlord or novice investor, choosing how to purchase your next buy-to-let (and from who) is a big decision. It takes time, energy and most importantly – trust. So how can you feel confident in the investment property you’re choosing? Well, that’s where the GetGround due diligence process comes in. We caught up with Luke Martin who heads up our Supply team, responsible for the bringing on of high quality, investment-ready stock onto the GetGround platform to find out more.
The GetGround due diligence process differs depending on the type of property you’re purchasing because the risks associated with each are not always the same. To reflect this, we treat them differently from the very start of our process. Let’s begin with new builds:
Vetting new build properties - the GetGround way
Our due diligence process for all new builds (whether completed projects or off-plan) always includes the following checks.
1. First, developers complete a due diligence checklist
To begin our due diligence, we compile all the details about the development in a number of predetermined areas. These areas are those which we feel are the most important to check for, and which will ensure the safety of those browsing our marketplace for their next investment. These include:
- Payment Terms and Deposit Protection
This area is of the utmost importance to us as it revolves around the payment terms of the development, and how well funds are protected for our customers. Irrespective of the stage the build has reached by the time it enters our process, fully understanding how and where customers’ funds are stored, and how they are protected, is critical to our due diligence process.
- Developer Track Record
By checking the developer leading the project and their previous track record, we can more deeply understand whether the development is likely to complete on time and on budget. Although previous performance is not always a direct indicator of future performance, if there are notable trends that raise concerns, we want to know.
- Build Status
We want to gauge how far along the build journey the project is, and when it is expected to complete. This informs us how far off-plan the development is, when investors are required to organise financing, and how long the period is for problems to potentially arise.
- Development Details
This final area scrutinises over the building itself, and checks for any signs that might impact the ability for an investor to let out the property on a long-term basis.
Next, we proceed with our own checks
Once we have reviewed this information and share confidence in the project, our internal analysis of the project begins. This includes:
1. Indicative sales & rental analysis
A sales and rental analysis of the development allows us to verify the information provided by our Supply partner, and compare it against properties in the local area too. We use a model to analyse the development in terms of both price and rental estimates, which ensures those properties on our platform perform well as an investment relative to the rest of the region. External sources of data like Rightmove are also used as a reference point to understand historical transactions and any trends, to better understand the capital and rental growth potential of the area.
2. ICR/Stress test
Not all properties can be mortgaged equally, and the current interest rate level, a property’s rent and its characteristics heavily determine its mortgageability. To accurately estimate the deposit that an investor will have to put down to acquire a property, all properties in the GetGround marketplace are subject to an Interest Coverage Ratio test (ICR). This ensures that given the deposit suggested, the property will both be mortgageable and cash flow positive.
3. Lending viability analysis
Our final check assesses lending viability. We have a panel of lenders we speak to on a frequent basis, to gain an insight into the development and its viability for lending. This concentrates on the ability for customers to raise finance, whether overexposure limits have been reached, any structural issues that exist and whether the project is seemingly investor-led, all of which might affect future financing for investors. We are also able to arrange financing for GetGround clients via our financing product, GG Mortgage - bringing all the additional services you require to get your property investment off the ground, under one roof.
Vetting second-hand properties - the GetGround way
The vetting of second-hand property requires a different due diligence process as the risks associated with second-hand are different to new builds. This process consists of a Land Registry check, sales and rental analysis and checking mortgage-ability. Let’s assess those one by one:
1. Land registry check
Obtaining the Land Registry file of an investment property allows us to get a better understanding of the property's history, its previous owners and any charges previously made against it. Using this we can determine any potential issues that may be associated with the property before it reaches a GetGround customer.
2. Sales and rental analysis
This stage of the process takes a deeper look at both the price and rental estimates of the property provided to us, to see how the figures fit in line with the local area. This is completed using both internal models and external sources, to ensure that the returns we are advertising are realistic and evident in the market.
3. Mortgage-ability check
Ensuring the property is mortgageable is an important consideration as the majority of buy-to-let investors will rely on using leverage to fund their investment. These checks confirm whether financing will be available for future purchasers, or if not, marked as 'cash only' on our marketplace so customers are fully aware.
What does this mean for your investment?
We see it as our responsibility at GetGround to provide investors with investment opportunities we’ve assessed to be both high quality and investment-ready. While no investment is ever risk-free, we’re confident in the quality of all properties available to you on the GetGround platform.
Ready to get started? Don’t wait, start browsing hundreds of vetted properties on our marketplace now or speak to a consultant.
