Advice - should I buy a run down house right now!

winop

Sorry Ive never done this before! I want some advice about if I should buy a house that has come up in our street. Its a house that was owned by an elderly lady and the house is in need of modernisation, not a problem as my husband is a builder. The house is up for £110 000 and we think when finished it should be about £260.000. We currently have about 200.000 equity in our house and I was wondering how I could release some of this money to buy this other house. Its always been a dream to buy a run down house and for my husband to work on here for a short period to use the money for his pension plan. Am I mad to do this at this time? Whats the best way to find the money for the mortgage? Can we re-sell the house when the work has been done or do we have to wait a period of time? .........Or have I been watching too many house renovation programmes!!

poppysarah

How would you pay back the money you use to buy the house?

Do you have a business plan? When would your hubby do the work? Inbetween jobs?
A lot of builders have projects like this to work on whilst they have nowt else to do. Or at least they used to.

Do you have skills yourself? Or just love watching the programs? (Sorry that might sound really flippant, wasn't meant bad!)

winop

Obviously I'm very inexperienced but I do have a good job that could financially suppotr the project! No I haven't yet got a buisness plan but yes I would need to be clear about what is involved. My thoughts are that my hubby would work on the new house for a short period (hopefully), we would hope for a quick turn round and he's confident of this. The advice needed is whether we should get a second mortgage on the back of our current house or get a completely seperate mortgage, I'm not sure if we would have to hold onto the house for a period of time or if we could sell it straight after we've done the work? Are there common pitfalls? Is this the right time to be looking for this kind of investment...........its how best to secure the finances advice we ask really.

poppysarah

Without a deposit you probably can't get a mortgage on the new one.

Are you super confident enough to financially risk your existing home?

Draw up a plan - work out costings. Show your husband you're serious about being involved rather than it just being his project.

Could your job suffer if you have to arrange lots of stuff if your husband is too busy with his work?

winop

I suppose to be clearer my mortgage finishes in 5 years, should we extend this to a longer period of time to find the 100.000 needed or should we get a seperate mortage for say 10-15 years?? thanks

00ec25

finances?
the obvious would be to remortage your own house, can you afford repayments on 200K and would anyone lend you that much secured on your own home?
what is the project budget? 110K purchase price +? for the works? as said this is business plan territory
what sort of builder is your hubby, own company with employees or just a one man band? can he do all trades or will he need to pay mates to do electrics etc - how available are they and how committed/reliable would they be

poppysarah

If its as a quick turnaround then the cheapest pay back mortgage with lowest redemption fees is what you need. How you work it out - speak to a IFA perhaps who gives independent and full mortgage advice. (whole of market ?)

The business plan needs to be put together with all works listed, timescales and who's doing it at what cost.

mlz1413

purchase = 110,000
interest on 150,000 borrowing (purchase + materials) @ 8% for 6 months = 6,000
Materials, elect, plumbing, roof, windows, garden: 50,000
buying costs = £500
Selling costs; solicitors, HIP & EA @ 3% = £9500
Total APPROX buy = 176,000
total APPROX sell = 260,000

= 84,000 profit subject to GCT (less allowances)

Very roughly speaking it probably is worth the investment, but I would ensure you get your H to draw up a list of repair costs and time frames, ensure these estimates are for certificated works.
Build in 3 months to sell and complete.
Ensure your sell price is realistic.
Speak to an IFA about how to borrow, speak to an accountant about how to apply the borrowing, speak to a solicitor about any pitfalls legally.

chappers

All of the building aspects seem to have been covered above, with regards to selling on, you can just sell it on but there are tax implications involved, as this will be seen as a for profit development.
Alternatively could you consider selling up taking the equity from your current house to buy and do up the property and then move in , thus slashing 5 years off your mortgage and taking away the tax implications when you come to sell and banking the profits.

Homersimpson

I would be very surprised that a house worth 260k needing 50k of work is on at 110k? Are you sure of the selling price? Is it a normal sale or sealed bids? If its sealed bids then expect the price to increase dramatically. I've never seen a house for sale around here where you could make that much profit on renovation.

If its totally derelect or non habitable then some people may have problems with getting mortgages, if it really is cheap then my experience is they do block viewings and uncle Tom Cobley and all trapse through the house (including lots of young families looking to get on the ladder) which tends to push the price up.

lightSwitch_3

If your prices are correct then it sounds like a steal, even better that you have a builder and the house is in your road, all this helps tremendously in making this project a profitable success.

Note though. If you are counting on prices as seen on property websites then beware. Nowadays these prices are wishful thinking. In London they are at least £50,000 overpriced.