Melissa Lewis, 35, is a property investment specialist and deal analyst who has advised property investors on over 100 deals in her seven years in the job.
“One consistent pattern I see is that many deals look strong on the surface: price, yield, location; but once properly analysed, the financial reality is very different,” she says.
“Having the funds to purchase the property is almost the easy bit; running it is stress test two.”
Many of the strategies and tools Melissa uses in her work with investors can be applied by owner-occupiers purchasing homes for themselves, as well as those looking to buy to rent out.
She offers her tips on how to get the best deal on a property – and what investors need to consider before committing.
What are the key considerations before investing in property?
When I assess a property, I use a framework called CORE: cashflow, operations, risk and exit.
Cash flow is about understanding the full monthly cost of the property, not just the mortgage. I always build a simple spreadsheet including bills, council tax, insurance and any service charges, and stress-test this by asking: if this increases by a few hundred pounds each month, would it still feel comfortable?
I look at cash flow two months after buying the property and also after 10 years, because these short and long-term perspectives tell you different things.
The two-month point is usually the most expensive, due to several upfront costs all happening at once: moving costs, furniture, repairs, maintenance, higher bills than expected, service charges, post re-routing, etc, not to mention the purchasing costs, such as stamp duty and conveyancing. A property that started off looking affordable to begin with can feel very different in reality.
I also look further ahead. For example, some people are buying with a long-term family focus in mind and may eventually want to pass the property on to their children. In those cases, we may look at what the property could realistically look like financially over 10 years, including future growth, refinancing, maintenance and ownership structure.
Operations is about how the property works day-to-day. This includes practical factors like layout, storage, and natural light, but also ongoing maintenance. For example, can the purchasers realistically manage the garden or general upkeep? Neighbours won’t hesitate to knock on your door if they have a complaint.
Risk is another consideration. Buyers should check the condition of the property and what work might be needed. Even small things add up, so it’s important to be realistic about costs. Try to take a builder round on your second or third viewing to get an idea of what these might be.
You also need to look at whether there are any planned developments nearby by reviewing the local council planning portal, as these could be a threat to a property’s value. The final risk point is to fully understand whether the property is leasehold or freehold and any costs or restrictions that come with that.
Exit is thinking ahead, which you should do even as an owner-occupier. Who would buy this property after you? Once you’ve purchased the property, keep this in mind and avoid over-personalisation when it comes to decoration; you want to make sure the property has as broad an appeal as possible.
Overall, it’s about stepping back and looking at the property from a financial, practical and long-term perspective, rather than just thinking: “I have £X amount, so I can afford to buy this property”.
Evaluating a property’s potential
My advice on this has changed slightly in recent years because building costs, labour laws and project timescales have all increased. Rather than assuming that adding square footage automatically adds value, I now look at what the buyer is trying to achieve and whether the configuration will genuinely improve the property in a way that suits the current market.
I would consider whether similar properties nearby have successfully added value in the same way, particularly looking at everything allowed within permitted development [where full planning permission isn’t required], such as loft conversions and one-storey extensions on the back of a property.
It’s important to see how the end value would sit comfortably within the local market ceiling price.
It can be harder to predict, but I would then weigh up the approximate build costs versus the likely increase in value. I’d also consider whether the layout and end result would actually improve functionality and appeal. It’s important to remember that some buyers prefer open plan, whereas others prefer separate functioning rooms.
Sometimes, works improve the enjoyment of the property more than they improve resale value, so I don’t assume every extension or loft conversion will automatically generate a strong financial return.
How to decide what price to offer
I don’t personally follow a one-size-fits-all rule and always offer a fixed percentage below the asking price. I build my offer from evidence based on the property, its condition, and what’s happening in the local market.
To do this, look at comparable sales for the road and within a half-mile radius. What have similar properties in the same area sold for recently? This should give you a benchmark range. Then factor in the condition of the property; if work is needed, get rough estimates and adjust your offer accordingly.
It’s also important to consider the market conditions. If there’s high demand and limited supply, there may be less room to negotiate. If a property has been sitting on the market for a while or has had price reductions, that can give you more leverage.
In general, separate emotion from the decision; it’s easy to overpay for a property you really like, but grounding your offer in information and costs helps you stay objective.
Common buyer mistakes
The most common mistake I often see is buyers who forget what their criteria are. Whether it’s the budget, the number of bedrooms or the size of the garden, stick to your criteria and don’t waste time looking at properties that don’t fit into this.
Ideally, you want to find more than one property that fits what you are looking for, so you don’t become emotionally tied to one in particular.
I also see buyers underestimating the cost of work or assuming everything is cosmetic. They fall in love with a property and overpay, which means they overlook the problem areas. As no one can accurately predict exactly how much a property is going to cost in terms of maintenance, I would also advise having a pot of money set aside for every eventuality.
Another oversight people make is not viewing the property at least twice and at different times of the day. Buyers often rush this decision due to time pressure or wanting to hurry and secure a property and don’t take the time to properly consider it from all angles.