Best Way To Purchase Propertys?

robbie89

Hi all,

Long time reader first time contributer.

I'm curious as to what is the best way to use my money...

Currently I own my current 3 bed property in Cash. It's worth around £135,000 although for a quick sale I realised I'd have to take around £125,000-£128,000.

Aside from that I have £14,500 which I'm using as a deposit for my next house, it's a 10% deposit but the house is worth around £175,000 really!

I plan to rent my current home, the 3 bed, out for £650 per Month. But I'm hoping to purchase more property this year.

Whats the best way to do this?

Do I sell up my first property and use this money for multiple deposits?

Do I remortgage?

Not really sure what best here. Another problem I have no credit history as I'm only 20 and only have a year or two' accounts. (I run a business)

Thanks,
Rob.

phlash

Very fortunate position at your age.

It all depends how much time you have to manage multiple properties?

At this stage I would aim to grow your business, knowing that you have no mortgage to worry about, that way you can focus 100% on it.

Obviously, I know very little about your circumstance, but just bear in mind about spreading yourself thin. (In terms of time)

robbie89

Hi Thanks for the reply.

With regards to time managing propertys. I would rent them out as part of a "fully managed" plan which would take 10% or so of the rent, but keep everything as hands off as possible for me.

Thanks,
Rob.

phlash

The yield on your house would be 5.3% which isn't great, but it is more than a lot of BTL Landlords have.

(11*650) / 135k = 5.3% (Long term you should factor in a months void in every 12)

You could probably get a better yield with a couple of smaller properties. What area do you live in?

mlz1413

robbie89 wrote: »

Hi Thanks for the reply.

With regards to time managing propertys. I would rent them out as part of a "fully managed" plan which would take 10% or so of the rent, but keep everything as hands off as possible for me.

Thanks,
Rob.

You still need to check the property yourself, if you have been reading this forum for a long time then you will know not all agents are worthwhile.

Ensure you know your responsibilites as a LL and don't depend on LA to tell you what they are.

Ensure you keep your accounts in order and get written valuations at start of rentals for GCT purposes.

I'd agree just stay at one for a bit and see how you get on.

Funds can be raised anyway you want but you will need to prove the funds where used for the purchase to be able to claim the interest costs against the rental income.

robbie89

phlash wrote: »

The yield on your house would be 5.3% which isn't great, but it is more than a lot of BTL Landlords have.

(11*650) / 135k = 5.3% (Long term you should factor in a months void in every 12)

You could probably get a better yield with a couple of smaller properties. What area do you live in?

Thanks,

I paid £110k for the house. That was around 6 Months ago.

So the actual yield would be 11*650 / 110k = 6.5% correct?

I live near Peterborough.

robbie89

mlz1413 wrote: »

You still need to check the property yourself, if you have been reading this forum for a long time then you will know not all agents are worthwhile.

Ensure you know your responsibilites as a LL and don't depend on LA to tell you what they are.

Ensure you keep your accounts in order and get written valuations at start of rentals for GCT purposes.

I'd agree just stay at one for a bit and see how you get on.

Funds can be raised anyway you want but you will need to prove the funds where used for the purchase to be able to claim the interest costs against the rental income.

Hi,

Yeah I understand my responsibilites have done some prior research.

Which would be the most effective way to raise income?

Re-Mortgage? Sell? or Save for a deposit?

With a 10% deposit on my new house I'm paying nearly 6% interest on a Fixed Rate residentual mortgage, which seems high.

Probably a very vague question but not sure on this one.

mlz1413

robbie89 wrote: »

Hi,


1) Which would be the most effective way to raise income?

2) Re-Mortgage? Sell? or Save for a deposit?

With a 10% deposit on my new house I'm paying nearly 6% interest on a Fixed Rate residentual mortgage, which seems high.

Probably a very vague question but not sure on this one.

1) - raising income could be through a job

2) are you asking about mortgaging your current cash owned home - it will have to have to be B2L as you wish to rent it out. Many B2L mortgages are 85% LTV or less

What does selling achieve - I though you wanted to keep your house no 1 to rent out?

Save a deposit - you will need this per property as B2L loans will not be 100%

You would probably be best to see an IFA and discuss your business thoughts, then get a proper plan put together before you start looking for loans / mortgages

robbie89

mlz1413 wrote: »

1) - raising income could be through a job

2) are you asking about mortgaging your current cash owned home - it will have to have to be B2L as you wish to rent it out. Many B2L mortgages are 85% LTV or less

What does selling achieve - I though you wanted to keep your house no 1 to rent out?

Save a deposit - you will need this per property as B2L loans will not be 100%

You would probably be best to see an IFA and discuss your business thoughts, then get a proper plan put together before you start looking for loans / mortgages

1) Yeah I understand that, was just asking about taking value from my current cash owned home.

2) Thanks for that, wasn't sure what the % LTV was typically given.

I would sell in order to have funds to purchase a higher yielding home, as I've recently spotted a few come up for sale.

Thanks for the advice, may well contact a IFA.

phlash

robbie89 wrote: »

Thanks,

I paid £110k for the house. That was around 6 Months ago.

So the actual yield would be 11*650 / 110k = 6.5% correct?

I live near Peterborough.

You should really base the yield on Market Value at the time of calculating the yield. It is basically an opportunity cost assessment.

i.e. You could sell and use ~£125-135k on some other venture. So the yield is on this amount.

mlz1413

robbie89 wrote: »

.
2) Thanks for that, wasn't sure what the % LTV was typically given.
.

have a look on moneysupermarket .com for a rough guide of whats on offer, the B2L shows most mortgages are now down to 60% LTV, also look at the fees!