Property developing - am i being naive?

squelchy69

Hello all
My partner is in a position at work where he may be forced to leave. He is not happy there and has always wanted to be his own boss and for sometime we have been trying to think of alternatives. He does not have any particular training or skills but is pretty good at DIY and really quite enjoys it.
I was watching a programme tonight about property development. Regular people were making a reasonable profit by renovating properties themselves (and getting experts in only when really neccessary).
I thought this could be what my partner is looking for.
Now, here is where I am a bit confused. These people all had time scales which they had to get the property finished by in order to pay less in fees and maximise profit.
Do they have a particular mortgage to do this? (Kind of like a buy to let?)Or do they just get a regular one? Technically we do not have any capital at the moment. The mortgage for our current home is in my name alone and I would not want to change this (I have 3 sons). I am mortgaged to the hilt anyway.
Is it at all possible for us to borrow for a short term whilst renovations occur even though I am fully mortgaged? Can my partner get a mortgage for a few months whilst work is done even if he is technically unemployed. The idea is all fees etc would be paid back to the bank within a few months.
I hope that this makes sense. I may be being a little naive here but am hoping that someone out there may be able to advise me on whether it is at least a possibility.
Thanks for any advice.
Jo:beer:

Radiantsoul

1. Were these programs recorded back pre 2007?
2. The kind of financing where a mortgage company lends more the value of an asset to someone who has no income is so pre 2007.
3. Probably there is more to property development than being merely good at DIY

G_M

The timescales are for various reasons:
1) makes for good telly (will they hit the schedule or not.....?)
2) if they have a mortgage, the longer it takes to do the place up, the longer they are paying out on the mortgage/loan
3) if they paid cash, they are losing the interest that cash could have earned in a bank, so the quicker they sell, the quicker they get their cash back.

It's hard to get mortgages on development properties as they are often not fit for habitation so lenders won't lend. Hence loans (expensive repayments) or cash.

seabright

They have a tight timescale because they have to make a mortgage payment every month, so the quicker they work & the quicker they sell the fewer mortgage payments they have to make.

You'd need to get a mortgage secured on the house you bought to do up. You might get a 75% mortgage, so you'd need the other 25% plus, legal fees, plus full structural survey fees, plus all the funds to do the work (and at least a 10% contingency fund) plus the money to make the mortgage payments each month.

Watch a few more of these programmes & you'll see that they always seem to go a bit wrong, go over budget and have more work needed than you think. And often they only make money because of a fast rising market, which we don't have now.

I don't mean to sound harsh and off putting, but to do it well needs money, time, hard work and excellent organisational skills. If you and your partner have all that, it could be your ideal job and you could really do well. Otherwise, you could end up with nothing much to show for all your efforts.

squelchy69

Radiantsoul wrote: »

1. Were these programs recorded back pre 2007?
2. The kind of financing where a mortgage company lends more the value of an asset to someone who has no income is so pre 2007.
3. Probably there is more to property development than being merely good at DIY

Thanks for the reply. Programme could quite possibly be pre 2007, it was on Sky. I understand that there is more to it than just DIY but he does have a real flair for some of these things and he is a very hard worker. He has put in a new bathroom here as well as lots of other decorating and flooring etc. It isn't something we would rush into, I'm just really trying to gauge if there is any point at all with out finances the way they are. It isn't made very clear on the TV and I didn't want to look a fool by just phoning mortgage companies randomly asking for them to lend money if there is nothing in place for people in our position.
Jo

G_M

Have you ever noticed in these progammes they give you the purchase price, add the project costs, and then compare against either the agent's 'valuation' or sale price at the end.

as seabright says there are many other costs:
legal fees
mortage application fee
survey
stamp duty
eastate agent
capital gains tax.... to name just a few!

Fire_Fox

squelchy69 wrote: »

Technically we do not have any capital at the moment. The mortgage for our current home is in my name alone and I would not want to change this (I have 3 sons). I am mortgaged to the hilt anyway.
Is it at all possible for us to borrow for a short term whilst renovations occur even though I am fully mortgaged? Can my partner get a mortgage for a few months whilst work is done even if he is technically unemployed. The idea is all fees etc would be paid back to the bank within a few months.

There is no technically about it, you don't have any capital and he doesn't have any income! Where is the benefit for the lender? It's all risk. The first thing you need is a deposit and the second is a business plan.

squelchy69

seabright wrote: »

They have a tight timescale because they have to make a mortgage payment every month, so the quicker they work & the quicker they sell the fewer mortgage payments they have to make.

You'd need to get a mortgage secured on the house you bought to do up. You might get a 75% mortgage, so you'd need the other 25% plus, legal fees, plus full structural survey fees, plus all the funds to do the work (and at least a 10% contingency fund) plus the money to make the mortgage payments each month.

Watch a few more of these programmes & you'll see that they always seem to go a bit wrong, go over budget and have more work needed than you think. And often they only make money because of a fast rising market, which we don't have now.

I don't mean to sound harsh and off putting, but to do it well needs money, time, hard work and excellent organisational skills. If you and your partner have all that, it could be your ideal job and you could really do well. Otherwise, you could end up with nothing much to show for all your efforts.

Thanks for getting back to me. Time and hard work wouldn't be an issue if he were to give up he regular job but cash would. I appreciate that many of these do go over budget and was hoping that this could all be covered in some sort of mortgage. Obviously if this can't happen without any cash as a back up. This is a real shame as I can see my other half being involved in property development. Thanks for taking the time to reply. I think its back to the drawing board for us!
Jo

squelchy69

Thanks to all who replied. This site is great for getting advice. I just really wanted to know if there was any point. With the lack of capital, obviously not! But I didn't know how it works and as my mum says - If you don't know - ASK!
We will have to start looking at something else that doesn't require capital to start..........................any ideas?
I already work full time with shifts and overtime to pay the mortgage etc, so looking for something that my partner can do and I can maybe assist with.
Thanks again.
Jo

chappers

I'm sorry to say that with the best will in the world, without some capital, it's not going to be viable.
Some of the development lenders are lending again but only at about 55%LTV on the purchase and a maximum of 65% on the finished developed value so as you can see you are even well short of that.

I have been running my own building company for 10 years, I own two rental properties and am struggeling to find affordable finance for my second development.

Colincbayley

The money in any property development is not in your DIY skills.

In order to make money in property, you first need money ( Well some at least )
The profit from a development is in the buying, selling and sticking to budget. You need to be a Jack of all trades, not only plumber/builder, but also project manager, accountant, salesman, negotiator etc.

Spend some time doing plenty of research before spending even 1 penny.

( these TV development programs may well make good telly, but it is different in the real world )