Newbie Property Developer - raising funds?

kelloggs36

I'm not a property developer yet! I am looking at possibly buying a house which needs renovating but have not done this before. The problem is that we already have a mortgage for our own house. The equity in this house is about 90k. The house we are looking at is worth about 115k and needs about 20k worth of work doing to it but when done it should be worth about 170k. Question is: am I deluding myself that we can do this, or is there a way of securing the finance?

jonesMUFCforever

Purely my opinion but if you have to ask it's not worth doing.
Bear in mind if it goes pearshape you risk losing your home as well as possibly making a loss on your new property if markets turn against you.
You make no mention of whether you have any funds to put in yourself or whether you can afford the new mortgage to purchase.

BobProperty

kelloggs36 wrote:

.....The house we are looking at is worth about 115k and needs about 20k worth of work doing to it but when done it should be worth about 170k......

Having watched too many repeats of Property Ladder ( ) are you sure about your figures? Those figures sound rather "too good to be true". I am curious that you say "is worth about 115k" and not is for sale for 115k which makes me think it is on the market for more than 115k.
I don't see why it can't be financed, I'm sure someone will lend you the money. You just need to be able to turn it round in a short space of time. Borrowing 115k + 20k + fees of say 5k will cost about £700 a month IO.

kelloggs36

It's not on the market yet, so it is a bit of a guestimation but other houses in similar states are on at auction at about that price.

Doozergirl

You need to go and see an Independent Mortgage Advisor and see what the best way of affording the property will be. You'll probably have to remortgage your own home for the deposit unless you have about 15% saved already.

Have you done this type of thing before? How is your budget split out? Are you sure there won't be any surprises and have you budgeted for the potential ones?

If those figures are correct, then it sounds like a pretty good deal. I'd only question your figures slightly because I've not seen below market deals in high enough concentration to be able to put a 'market' value on them. However, if that's what is is worth to you (I wouldn't go much higher personally ) then you go in with that amount and keep your fingers crossed. If it doesn't come off, then there will be another along soon - they're like buses

We're going in with a bid for a COMPLETE mess next week and it never gets any less nail biting .

Jim_B_3

Why is the house currently not valued at 150k?

kelloggs36

don't ask me!

theGrinch

if you are convinced that this is the path that you wish to take then go for it, if only for the experience and the contacts that you will make. I am sure you will get "job satisfcation" doing it.

in terms of raising funds, if the property is mortgagable then you can raise one, but you will either need to refinance your existing property or find investors (friends and family) willing to take a punt on you.

if you know the seller then you could joint venture with then. its an outside chance in most case, but worthy of a mention as it does happen now and then

my biggest tip is that property developing profits are made at the time of purchase (i.e. the price you agree to buy at) rather than the price you sell at! So if you can drive the price down to under £115k then push hard.

kelloggs36

thanks for that. I will have more of an idea on Tuesday whether the price is affordable as I will ask the solicitor dealing with the old lady's affairs (she sadly died and the house is to be sold to be passed on to her two elderly sisters).

real1314

kelloggs36 wrote:

It's not on the market yet, so it is a bit of a guestimation but other houses in similar states are on at auction at about that price.

"on at auction" or SOLD at auction.

If it's going to be listed at £115k and needs £25k of work to mke it worth £170k, then I'd predict it would sell at auction for £140k, give or take £5k.

sa_v6

Have you thought about developing property abroad? I'm looking into this myself at present and there were some good sites mentioned in the Sunday Times a couple of weeks back, the one I remember because it had FAQs and advice for each individual market was https://www.foreignpropertybuyer.com

If you look at property in developed Europe it's all expensive, and on the continent most people rent. I see this going the same way in undeveloped countries like Slovenia etc and that's where i'm going to look in the New Year.

If you fancy exchanging any nuggets of info you find, please PM me!