How to take equity from house to fund BTL venture ?

mikeyw

Funnily enough AnsellD i'm also with the excellent FirstDirect so i'm gonig to phone tomorrow to see what I can borrow and at what rate.

socrates

poppysarah wrote: »

Erm, you own the house. (Well all but 50k of it)
If you want the "cash" sell the house.

you can't have your cake and eat it.

poppy you normally talk a lot of sense - I do not know what your line of thought is here.

If the OP had an offset mortgage could he not do what he wants with his money as long as he can afford it?

He has a large equity stake in his property and any mortgage after selling his property (as you advise) to start his new venture would be at a much more inflated rate - does not make sense to me.

Why would he need to go through the expense and upheaval of selling when he can release equity he has built up through his own good fortune.

To the OP before you jump into all of this look at all the pros and cons of being a LL - read up on LandlordZone and aim for as close as you can to 10% yields on your rental property to allow for fluctuations in the market.

anselld

mikeyw wrote: »

Funnily enough AnsellD i'm also with the excellent FirstDirect so i'm gonig to phone tomorrow to see what I can borrow and at what rate.

Well I suspect you wont get 2% these days, but 2.9% tracker or 3.49% fixed for 2y are available and offset is wonderful - total flexibility with your money. Apply fo the max you think you can get based on valuation and then you can draw or repay at will.

FD are the best

poppysarah

socrates wrote: »

Why would he need to go through the expense and upheaval of selling when he can release equity he has built up through his own good fortune.
.

A quick bad decision, a couple of bad tenants and the equity he's built up could be eroded.

People still see houses as cash machines, when they are in fact supposed to be homes.

Or have I just got a bad attack of the housepricecrashes today?

I think I've just been reading about more excessive debt caused by people being able to take out money from their home, as if it were free money, when actually they're borrowing it on a whim, with little business planning or knowledge of the sector.

If someone came in and asked about extending their mortgage to fund a pet shop business in a town full of pet shops, with no prior experience of running a pet shop, you'd be jumping up and down telling them no.
What makes BTL so different?

socrates

poppysarah wrote: »

A quick bad decision, a couple of bad tenants and the equity he's built up could be eroded.

People still see houses as cash machines, when they are in fact supposed to be homes.

Or have I just got a bad attack of the housepricecrashes today?

I think I've just been reading about more excessive debt caused by people being able to take out money from their home, as if it were free money, when actually they're borrowing it on a whim, with little business planning or knowledge of the sector.

If someone came in and asked about extending their mortgage to fund a pet shop business in a town full of pet shops, with no prior experience of running a pet shop, you'd be jumping up and down telling them no.
What makes BTL so different?

Makes a lot more sense than your previous contributions (in this thread) :T

Niche

poppysarah wrote: »

If someone came in and asked about extending their mortgage to fund a pet shop business in a town full of pet shops.

This is good advice, do a rightmove search and see how many houses are for rent in the area you are planning to buy.

I was surprised when I found over 1000 houses for rent within a 3 mile radius of where I live, compare that to 570 for sale in the same area.

If you run propertybee in firefox it will tell you how long some have been awaiting tenants and the rents they charge for the property type you are planning to purchase.

sjcollett

mikey you need to call your lender and find out how much they will lend you. It is not just based upon what your current house is worth, but what you are currently earning income wise and whether you can afford the increased mortgage.

It is irrelevant to them that you are buying a BTL - they want to know that you can pay your own mortgage. I feel that your current income will dictate what you are able to drawdown from your own place.

Anyway, if you get enough for a 25% deposit you can then fund the rest with a BTL mortgage. Personally BTL has been very good to me, but you must do your research and treat it like a business. Hope this helps.

mikeyw

Thanks guys - some useful advice. Speaking to first direct I reckon I should be able to secure 125K and aim to spend another 10K on refurb.

The interest is only 2.79% so a mere £290 per month (obviously there are other costs to consider and the rate will naturally rise)

Surely taking practically all the purchase money from 1stD is the cheapest way to fund this as some costs are waived as i'm an existing customer and recent mortgage newstarter with them. Getting a 75% BTL loan from elsewhere seems a more expensive approach

Someone mentioned trying to achieve yields of 10% - is this realistic these days ?

On a 100K house you'd need nearly £850 a month and that seems unrealistic anywhere in the UK...there might be so rare exceptions.

With lower borrowing costs these days isn't 6-8% enough ?

I'd be looking to take in £625 per month for a 2up 2down in Harrogate where the rental market has only 290 props versus nearly 1000 for sale within 3 miles of me.

This isn't a whim for me been looking to enter the market for several years now and don't want to miss the boat again as things appear to be picking up now.

Thanks again for all the excellent advice.

socrates

mikeyw wrote: »

Someone mentioned trying to achieve yields of 10% - is this realistic these days ?

On a 100K house you'd need nearly £850 a month and that seems unrealistic anywhere in the UK...there might be so rare exceptions.

With lower borrowing costs these days isn't 6-8% enough ?

You are a cash buyer and there are repossessions at auction or with agents - the whole point is to take advantage of the current turmoil.

Think like an investor - they will never buy a property that has been sitting on agents books for weeks, they will look for distressed sales or properties that need a quick completion.

Personally I would find out (locally) who handles the most repos and go out for a coffee with him/her - talk to them about how you get to know about bargains before anybody else does

mikeyw

I'd love to get a repo Socrates but through ignorance wsn't sure how to find out about them

I asked an Estate agent and her line was the banks need to get as much money in as possible so weren't letting repos go cheaply any more....maybe she had an agenda though !

If anyone has any advice on finding repo info i'd love to know. I'm obviously as keen as possible to use any tricks to buy in well BMV.

Thanks again,
Mike.