What to Do After Buying an Investment Property: The First 90 Days

Buying a property can take months. You find something promising, run the numbers, negotiate a price, arrange the mortgage, deal with the survey and wait for the solicitors to finish doing whatever solicitors do.

Eventually, you complete.

There's usually a considerable sense of relief, particularly if the transaction has been complicated. You might even celebrate with a bottle of champagne.

And quite right too.

But I've increasingly come to think that completion sits in a slightly strange place in the life of a property investment.

It's the end of buying the property, certainly. But it's also the beginning of actually owning it.

Up until now, most of the money has been going out. From this point, hopefully, some starts coming back.

The first 90 days are when the assumptions you made before buying begin to meet reality. The property needs to be brought into the condition you intended, the management arrangements need to work, the right tenants need to be in place and the cash flow needs to start behaving something like the spreadsheet suggested it would.

Here is how I think about that process.

What should you do immediately after completing on an investment property?

The first priority is to make sure the property is properly handed over and that responsibility for everything is clear.

That sounds obvious, but during a purchase there can be an extraordinary number of people involved. The seller, their agent, your solicitor, the lender, surveyors, contractors and perhaps an existing managing agent.

Completion doesn't magically bring all those loose ends together.

I want to know that the insurance is appropriate and effective, utilities and meter readings have been dealt with, keys and access arrangements are understood, and somebody is responsible for managing the property from day one.

If there are existing tenants, the handover becomes particularly important. Rent collection, deposits, tenancy records, maintenance history, compliance documentation and communication arrangements all need to be checked.

If the property is empty, the priorities are slightly different. I want a clear plan for any outstanding work and for getting it ready to let.

For an overseas investor, having somebody reliable on the ground is particularly valuable. I don't want to discover from Indonesia that everyone involved assumed somebody else was organising the electrician.

The important thing is that ownership begins with a functioning management arrangement, rather than a collection of assumptions about who is doing what.

Why are the first 30 days after buying a rental property so important?

There's usually a version of the property that exists in my head when I buy it.

Perhaps it needs decorating, a bathroom improving or some maintenance work that I've already allowed for in the purchase calculations. I have an idea of the rent it should achieve, who will want to live there and how the property should be managed.

Then I complete, and all those tidy assumptions become actual jobs.

This is where temporary compromises can quietly become permanent arrangements.

It's easy to say we'll leave the decorating until the next tenancy, put off a maintenance job that isn't particularly urgent or accept a lower rent because somebody can move in immediately.

None of those decisions is necessarily wrong. Sometimes circumstances justify changing the plan.

But if I modelled an investment on the assumption that I was going to improve the property, change the way it was managed or increase its rental income, I either need to implement those changes or recognise that my investment assumptions have changed.

Otherwise, six months later, I may be wondering why the property isn't producing what I expected.

Usually the spreadsheet hasn't changed.

I just never quite got around to implementing the plan.

How do you prepare an investment property for letting?

My objective isn't necessarily to make the property as attractive as possible to everybody.

It's to make it attractive to the people who are most likely to want to live in that particular location.

If I've bought a family house near good schools, I'm thinking about what a family will value. If it's accommodation aimed at young professionals, their priorities may be quite different.

I also want to avoid confusing my own taste with what the tenant market actually wants.

According to Mrs Wicking, my personal taste isn't particularly good anyway, so perhaps that's just as well.

Before marketing, the property needs to be safe, legally compliant and in a suitable condition to let. Any necessary repairs or improvements should be completed, and the relevant safety checks, certificates and other requirements confirmed.

Beyond that, I'm trying to spend money where it will genuinely improve the tenant's experience, the achievable rent or the long-term condition of the asset.

There isn't much point spending thousands on improvements that the local market won't pay for.

Equally, leaving a property in poor condition to save a relatively modest amount can be a false economy.

The aim is to get the property into the condition that makes sense for the investment, not simply to spend as little as possible.

How do you choose the right first tenant for an investment property?

There's a slightly uncomfortable period after buying and preparing a rental property when it's ready to let but nobody is paying you any rent.

The mortgage is running, the property is empty and every additional day feels expensive.

So when the letting agent rings and says they've found somebody who wants it, there's a fairly strong temptation to say yes.

I'd resist making the decision quite that quickly.

The first tenant is part of the investment decision too.

I want to know that the proposed rent is appropriate, that the applicant can genuinely afford it, that the referencing has been completed properly and that the tenancy is being set up correctly.

I also want to understand why the letting agent thinks the applicant is a good match for the property.

And I say that as somebody who owns letting agencies.

An agent is understandably keen to demonstrate that they can let a landlord's property quickly. Being able to say, "We let it in four days," sounds impressive.

But sometimes, "We rejected two applicants and it took us three weeks," describes the better piece of work.

A good letting agent understands that distinction.

The landlord should understand it too.

An extra week's void is visible and easy to calculate. The cost of an unsuitable tenancy can emerge much more slowly and may be considerably greater.

Of course, tenant selection must also be fair, consistent and compliant with the law. The objective is to assess affordability and suitability using appropriate evidence, not to make arbitrary judgements about people.

I'd much rather lose a little time getting the tenancy right than spend the next year wishing I'd been more patient.

How much cash should you keep after buying an investment property?

One of the uncomfortable things about completing on an investment property is how much poorer you can suddenly feel.

You've paid the deposit, Stamp Duty, legal fees, mortgage costs and perhaps a substantial refurbishment bill.

Then you look at what's left in the bank.

It's tempting to regard that remaining money as capital that ought to be doing something more productive.

But the property doesn't know that you've just spent most of your available cash buying it.

The boiler can still break. A tenant may leave unexpectedly. A repair might cost more than anticipated. And the mortgage payment will arrive whether the rent does or not.

That's why I regard cash reserves as part of the investment rather than money that somehow failed to get invested.

There isn't a single reserve figure that's right for every landlord.

A relatively modern house with modest borrowing and predictable costs may require a different reserve from an older multi-unit building with more complicated maintenance responsibilities.

I would consider the property's age and condition, the likely cost of major repairs, the mortgage commitments, the possibility of void periods and any other demands on my available capital.

For overseas investors, liquidity can be particularly important. Being several thousand miles away is inconvenient enough when something goes wrong without also having to arrange emergency finance.

Sometimes keeping a sensible reserve means buying a slightly cheaper property or waiting longer before making the next investment.

I'm comfortable with that.

The objective isn't to own the maximum amount of property at any particular moment. It's to own investments that I can afford to hold for a long time.

How do you know whether your rental property is performing as expected?

Before buying, I will normally have modelled the likely rent, management costs, maintenance, void periods, mortgage payments and expected free cash flow.

That model helps me decide whether the investment makes sense.

But it's worth remembering what it actually is.

A set of assumptions.

Once I own the property, I can begin replacing those assumptions with evidence.

Did it achieve the rent I expected? How long did it take to let? Were the refurbishment costs realistic? Is maintenance costing more than anticipated? How much cash is actually left after the property has paid its operating expenses and debt service?

For me, free cash flow is a particularly useful measure.

A property might produce an attractive gross rental yield while leaving surprisingly little money behind after costs.

That doesn't automatically make it a bad investment, because I'm also interested in long-term capital growth and the return on my invested equity.

But I do want to understand the relationship between the rent coming in and the money going out.

And I want to know whether that relationship is broadly consistent with the assumptions on which I bought the property.

What should you review after 30, 60 and 90 days?

I don't think this needs to become an elaborate management exercise, particularly for somebody buying their first investment property.

But I would approach the first three months with slightly different priorities.

During the first 30 days, my focus is on getting the property operating as intended. That means completing necessary works, confirming compliance and management arrangements, dealing with any handover issues and progressing the letting plan.

By around 60 days, I would expect to have a clearer understanding of what is actually happening. If the property was empty, has it let at the expected rent? If not, why not? Have the works finished within budget? Are there any recurring problems or unexpected costs?

By 90 days, I want to compare the original investment model with the evidence I've gathered so far.

That might be a relatively simple review of actual rental income, voids, refurbishment expenditure, maintenance costs, financing costs and free cash flow.

Ninety days won't tell me everything. In particular, it won't capture the full maintenance cycle or prove anything meaningful about long-term capital growth.

But it should help identify whether the investment is broadly following the plan or whether something needs attention.

And, perhaps most usefully, it should make me slightly better at assessing the next property.

When do you really know whether you bought a good investment property?

One of my best property investments was a multi-unit block in Lytham, near Blackpool.

It came with a damp problem we hadn't properly appreciated and rents that were far too low.

Not exactly the ingredients you'd normally associate with a brilliant purchase.

The owner wanted a quick sale, and we were in a position to move quickly. We knew the area, could make a decision and had the finance available. That allowed us to agree a price below what we believed the property was worth.

We were feeling rather pleased with ourselves.

Then we discovered just how prone the building was to damp. In hindsight, it might have been helpful to understand that a little earlier.

Sorting the problems out took considerable effort. We had to deal with the underlying issues, improve the building and gradually bring the rents up to appropriate levels.

But when we'd done that, we found ourselves with something rather special.

The income had improved substantially, and because we'd bought at such an attractive price, the investment economics were particularly good.

It turned out to be a gold mine.

I've thought about that purchase quite a lot because it's tempting to attribute the success to all the work we did afterwards.

And that work certainly mattered. Without it, we wouldn't have realised the property's potential.

But the most important decision had already been made before we owned it.

We were ready to act when somebody needed a quick sale, and that allowed us to buy a good asset at a very attractive price.

The damp could be fixed. The rents could be improved.

We couldn't have gone back later and renegotiated the purchase price.

I think you only truly know how well you've bought when you eventually sell. Only then can you look at all the income the property produced, everything it cost to own, the financing and what you ultimately received when you disposed of it.

But a surprising amount of that eventual result may have been determined on the day you agreed to buy.

What is the most important thing to remember after buying an investment property?

The first 90 days are about turning an investment plan into an operating asset.

Get the property into the condition you intended. Establish proper management and compliance arrangements. Take care over tenant selection. Protect your cash reserves. And start measuring what actually happens against what you expected.

Some assumptions will prove right. Others won't.

That's useful information.

But I'd also remember that the first three months are only the beginning of a much longer investment.

The spreadsheet was a hypothesis. Ownership gives you the data to test it.

And if I've learned anything from that building in Lytham, it's that good management can help you realise the value of an investment, but the opportunity to create an exceptional return often begins much earlier.

You find out how well you bought when you sell. But much of the return was already baked in when you bought.