FTB purchase house to develop - which mortgage?

blondends

Hi All.

Property in my area (nr. Cheltenham) is very very expensive and above my budget. So what I thought was I could purchase a cheaper property from lets say Derby that needs work - do the work - and then sell it on for a profit. The end result being that the profit can then go towards either a house closer to home for me to move in to OR another project and so on till I get enought cash to place down for a deposit.

Now what I want to know is can anyone give my some advice about which mortgage will allow me to do the above? I have no deposit and will need to borrow the extra to conduct the works on the property.

What do you all think? All comment welcome.

Cheers,

Chris

homer_j_3

I understand your eagerness to get on the proprty ladder.

I think that taking a 100% mortgage out to buy a proerty is perfectly acceptable if you are going to reduce the debt over the following few years through repaying the mortgage on a repayment basis and or regular overpayments and not rely on a rise in the market to provide you with some equity.

From my understanding you are going to max yourself out on borrowing and then go one step extra and borrow even more money to pay for doing the property up and hope to realise a profit. I think this is a risky plan and unless you are fairly experienced in doing this you could put yourself further back than what you are at the present.

Have you got any friends that are looking to do the same thing which will allow you to borrow enough to get a property where you live? You could rent for 5 months together to get a feel for what its like paying all the bills and how you get on together. If this goes ok. then you can look at it as a 2-3 year agreement that you will sell and take 50% out of it each etc.

If you cannot do the above then it looks like you are going to have to earn as much as you can and spend as little as you poss can and get a deposit together, which will take time but will be less risky.

blondends

Thanks for the feed back.

I have been looking at properties that cost around £60k - I have been told that I can get a mortgage up to £90k. The idea is that I borrow the £60k and then say another 5k-10k on top of that to modernise the house. So what I really need advice about mortgages out there that will allow me to borrow above the value of the property and then not mind me paying it back early/move to another house with quick succession.

Cheers,

Chris

AndrewSmith

To be honest with you I doubt that it would be easy to find a lender willing to lend 100% or more on a property that needs renovation.

However in answer to your question there are lenders such as Northern Rock for example who will lend you 95% as a mortgage, then up to another 35% as an unsecured loan. It is called their 'together' mortgage.

Please be very careful though and consider the implications of borrowing more than the value of a house. It could work out ok, but could also lead to disaster.

Sit down and chat it over with a local broker to get some specific figures, and a full list of lenders and products that will actually do this based on your situation.

It's ok for me to say a particular lender but without being privvy to all your information it's impossible to say for sure.

Hope this helps

Andy

Ian_W

Hi blondends,
Your scenario sounds very interesting - so much so you could flog it to a TV production company. What say you get some dishy bird, err like Sarah Beeney to front it and give it a sexy title like maybe like Property Steps, no I know Property Ladder. I think it would be a smash hit!! :rotfl:

Seriously mate everybody and their dog's after getting doer-up properties, "renovating" them and turning in a quick profit but unless you're in a booming market it really isn't that easy - even if you can get the finance, which I seriously doubt. You've really got to know what you're doing in a slow market, source a house cheap enough to allow for essential work and a profit when you sell. If you're an experienced developer or builder you're in with a chance but otherwise I'd leave well alone and concentrate on saving for a deposit in the cheapest area within range of where you work/live.

BoL.

david29dpo

i have just bought my first development, a 1 bed flat. took a lot of finding. fitted new kitchen, bathroom, flooring etc. 6 weeks of very hard work but i did it all myself to save costs. hoping to make about £9000, it gos on the market today! hopefully if it sells quickly i will do another, if i can find one. it is not as easy as a lot of people think and if you cannot do the work yourself there can be little profit.

vithya

david29dpo wrote:

i have just bought my first development, a 1 bed flat. took a lot of finding. fitted new kitchen, bathroom, flooring etc. 6 weeks of very hard work but i did it all myself to save costs. hoping to make about £9000, it gos on the market today! hopefully if it sells quickly i will do another, if i can find one. it is not as easy as a lot of people think and if you cannot do the work yourself there can be little profit.

well done, and good luck!