Buying houses for cash

sbw.business

Hi everyone, this is my first post to the forum, but I did look quite extensively for the answers to the questions I'm asking prior to posting - there just wasn't exactly anything I could find that answered them all.

I'm looking for some advice on buying my first buy-to-let property.

Basically, I now may well be in a position to by my first house for cash. I have around £40,000 in cash and liquid assets and have access to around £25-30,000 in the form of a bridging loan from a family member.

What I am proposing to do runs along these lines:

1. Purchase a house for around 15-20% under current market value with cash (purchase price + costs not exceeding c.£70k)
2. Take out a capital raising mortgage on the property for 75% LTV (hoping that the valuation would be closer to the market value than my purchase price)
3. Depending on how successful step (2) was, this would determine the ammount of capital I was effectively risking on the property.
4. Make repayments of the bridging loan capital (plus a nominal rate of interest) whilst I was waiting for the mortgage to be arranged.
5. Repay the bridging loan in full as a balloon payment on receipt of the mortgage, and store the remainder as cash

So, my real questions are:

1. What do you think of this as a basic premise?
2. What is the minimum time I need to have owned the property before refinancing it through a capital raising mortgage (6 months is a figure I keep coming across, but is there any way around this?)
3. Am I being too hopeful in thinking that I will be able to achieve such a significant reduction in price for a cash offer (from my research I think 20% is pushing it, but 10-15% didn't seem unreasonable)
4. Would I still be able to claim the mortgage interest payments as an allowable expense for the business (since effectively I would not be doing anything with the funds other than paying off the bridging loan and storing the rest as cash)
5. What sort of terms would I be looking at for such a mortgage - are they comparable to Buy-to-let?

I appreciate there are a number of quite detailed questions here but if anyone can offer any help/answers/thoughts on even 1 or two points I'd be really interested!

Many thanks!

maninthestreet

Why would anyone want to sell you their property for 15-20% less than it's current market value?

SailorSam

We bought a house for cash once,
Terrible mistake, we lost a lot of money on it. And it was all because a relative wanted us to do a favour.
My sister and boyfriend were both unemployed and looking for somewhere to live, they asked if we bought a house, and rented it to them, they could get rent from the Dhss and any shortfall between that and our loan payments, they would meet.
We couldn't have got a mortgage so took out three 'car loans'.
Almost needless to say now we had trouble getting the rent, often it was late from the Dhss and the difference even more often not paid.
After a couple of years the house had to be sold, but the market had changed and because origionally we were on such a tight budget we hadn't had a survey.
Now trying to sell we found out the house had subsidence.
Family favours, never again, we lost thousands.

Conrad

It's a huge subject, so to summarise;

When raising an ordinary mortgage there will be many considerations, such as whether you live there, and minimum income levels (usualy £25k net income for B2L), property type, property surroundings, whether or not you are an experienced landlord, type of rental contract etc etc etc.

Conrad

Also, when people say 'below market value', in fact they are usualy buying at the level the market can currently support - otherwise it would sell for more.

Trollfever

What does below market value actually mean?

Any purchase recorded at the Land Registry will set a new benchmark figure for similar properties in that location.

dimbo61

Are you an experenced landlord ?
Do you know the vast number of rules and regs in renting out a property ?
Have you got experence in building work and contacts to carry out gas safety checks/ electric checks ?
Have you found a suitable property which is close to a university to rent out.
What would happen if you could not rent out the property.
Have a look round your area and see how many empty properties there are to rent !

northerner79

Market Value is the estimated amount for which a property will exchange on the date of valuation. Market Value is therefore what someone is prepared to pay or an estimate.

Be careful, if my properties market value was around £100k I could put it on the market for £125k and accept £100k for it, this making the purchaser think they had got the house for 20% less than MV, thinking this was is completely incorrect. Consult an RICS surveyor, use a professional, it may cost in the short term but long term should pay dividends.