Savvy investors will often seek Below Market Value property, commonly referred to in the industry as BMV, as these types of purchases tend to be lucrative additions to a portfolio.
Those who have previously not encountered such opportunities might wonder what exactly is a BMV property, why are they sold at a discount and how can investors find and secure such opportunities?
What is Below Market Value property?
A Below Market Value property is one that is being sold at a price below the value that a comparable property would be sold for, at that time.
It is a property being sold with a discount and will have a sale price lower than its actual market worth.
This can occur for various reasons, such as time pressure to sell, financial hardships faced by the seller or potentially due to bank repossession.
Investors often seek these properties for their potential to provide significant returns when used as buy-to-let investments.
When purchasing BMV property, it is essential for buyers to conduct thorough research and due diligence to assess the property’s potential for rental income and capital growth.
It is also crucial to consider factors like the location, property condition, and overall demand in the area.
Why are properties sold Below Market Value?
Though some might feel discounted property prices are too good to be true, as mentioned, there are various legitimate reasons why properties might be sold below market value.
One of the most common reasons is when homeowners are facing financial which leads them to sell their property cheaply and quickly to alleviate their financial burden.
On the open market, divorce is often a reason for a BMV property sale, similarly, those selling to a family member might sell to them at a favourable price below the local market value.
Repossessions frequently result in properties sold under market value, as banks and lenders aim to recover their money as swiftly as possible.
In cases of developers with an excess of inventory or a pressing need for cash flow, they might be more willing to negotiate and sell below market value to secure a quick sale.
How to find BMV property in the UK
Whilst many investors actively seek Below Market Value (BMV) property as a great buy-to-let investment, few are successful in securing such properties as they are often found on a ‘who you know’ basis, and connections in the industry matter.
BMV properties are sometimes uncovered at auctions as these events often offer properties below market value due to seller urgency. Whilst auctions can be an excellent way to find good deals investors should be sure to research the property’s location and condition before bidding.
Ultimately, finding a BMV property in the UK requires patience, research, and networking with property professionals.
Why are BMV properties sold off market?
BMV properties are often sold off market to avoid the time and complexities associated with traditional advertising.
The off market route allows for sellers to only engage with a smaller pool of dedicated investors, minimising competition and increasing the chances of a quick sale, which is so often the top reason for a property being sold below market value in the first place.
How to calculate the Below Market Value figure
One effective method to calculate what a Below Market Value figure for a potential buy-to-let investment property might be, it to research figures at which similar properties have recently sold at.
By considering the sold price data of similar properties you will be able to ascertain whether or not the figure is actually below the current market value, and potentially how much of a discount you would be securing which will enable an investor to make well-informed decisions.
Why is buying discounted property good for investors?
Buying BMV property is a highly desirable prospect for investors as they’ll immediately boost the capital value upon purchasing, generating immediate equity in a property. And by acquiring property at a discounted price, investors will enjoy even greater capital appreciation should local market prices increase.
Investors also might wish to consider the strength of securing a property at a discounted rate in a market they believe will soon readjust – the purchase value disparity will offer a buffer should property prices fall overall.
Buy BMV property
Investing in properties below market value can be a lucrative strategy; savvy investors can reap substantial benefits from these undervalued assets.
To learn more about BMV property and to explore the options we may currently have access to, get in touch.