Buy to sell.

spadoosh

Sorry to bother you but after some advice if you can help.

Really like the idea of purchasing a property to rennovate and sell on. (homes under the hammer has soo much to answer for!)

Id like to think im not blind on this and certainly have a good idea on properties in my area. Not to mention a good idea on where to and not to spend on improving a property.

I do have sooo many questions but been unearthing answers for a while but struggling a bit more with this question. Essentially i want to know what mortgage options are available?? (unfortunately not cash rich...bummer ay?!)

The only option ive come accross so far is buy to let mortgages. a few points/questions with this.

1. Is this the accepted option for 'buy to sell' or is there other products out there?
2. Noticed interest only mortgages still seem to be about, in a situation where the intention is to only keep the property for 6 months (im thinking this type of product would be best for keeping costs down?! is this a feasible option?)
3. What factors, on a buy to let mortgage are considered? a little looking around seems to suggest they dont take personal income into account too much (emphasis on the too much, assume they still have to have some form of guranteed income) only asking for (estimated) rental.

At the moment im literally only at the research stage (if something happens, itll orbably be in 12 mths time), i really dont do jumping in with two feet prefering security over risk but getting to a point where my jobs dont give me as much satisfaction as i'd like, and would love the idea of property developing.

Just to give you an idea im not planning on making millions in a couple of years, im very aware property can be hit and miss (but feel my 'talents' and effort would lead to an income) Dream scenario would be (long term, not next weekend!) being able to move from property to property rennovating along the way to earn me an average/decent income. eg 4 properties a year averaging 5-10k profit from each (very basic idea).

I know there are lots of other costs/factors involved but would like to gather as much info as possible about the things i don't know as much about, the mortgage side of it being one!

Cheers for any help!


(p.s. i know i should seek a mortgage broker/advisor, im at the stage before that though!)

Sorry just relaised how long winded that is, hope i get a reply before you get bored!

holly_hobby

Hi

Buying to renovate and sell on, can be a good source of income - if you know your market, buy at the right price and know your costings & at least a 20% contingency fund for overspends, sufficient funding for mge payments unti sold, agt & legal fees, and taxes - you need to ensure that the cost of developement & reqd profit is consideration to the ceiling of the area/property type (unless it is an outstanding renovation which will break through the ceiling due to spec and demand - and justify any higher spend/over spec).

BTL mortgage lenders, most have a minimum earned income of 25k - although there are a couple who don't have that requirement.

Min deposit 20%

If you are a FTB, then your options are narrowed significantly.

A BTL mge is not appropraite as you do not intend to let the property, but apparently plan to develeop it , and reside in it whilst you do so.

A traditional mge is therefore reqd, which is based on propety being suitable for mge purpose (and valuing up as reqd with no retentions if funds are tight), and of course your income and status checks.

The only other way would be to go the investment finance route with specialist investment banks - rates and fees reflect the risk - again circa 25% deposit (esp if an inexperienced developer).

Programmes such as Property Ladder etc, can make things look easier than they are in reality - however, despite the downturn in the property market and buyers facing tighter lending paramaters for mges, there is money to be made, but you have to be absoutely clinical and thorough in the application of sourcing suitable properties, pricing and completing the job (inc reliable and proficient contractors as reqd), and ensuring that baring in mind the reqd net profit to make it all worthwhile and sustainable - your property and selling price remains appropriate, attractive and affordable to your target audience...

A career not for those without long pockets or the faint hearted .... !!!

Hope this helps

Holly

Thrugelmir

spadoosh wrote: »

being able to move from property to property rennovating along the way to earn me an average/decent income. eg 4 properties a year averaging 5-10k profit from each (very basic idea).

That's a demanding schedule. How long are expecting to take complete a sale of one property and then buy another suitable one?

spadoosh

Cheers holly, thanks for the info.

The traditional mortgage route is a no go i think, im not intending to live in the property, the g/f wouldnt be happy if i told her were moving into a project, having more or less just sorted our place! PLus a 10% deposit would always be a big bonus so if this is something i could look at i definately would be interested!

Like i say im struggling with this one btl seems no good as no intention of letting it (obviously worse case scenario it could be let to meet any payments and subsidise running costs) but only really intend on having the mortgage for a few months.

Had a quick look at the investment finance option and apart from increased costs i think they would be less likely to lend (no experience etc)

If it makes it any easier im not talking borrowing hundred of thousands, probably about £50-60k but this is proportionate to my current income levels.


thrugelmir. that was a long term plan. Most auctions have to be completed within 30 days and its only a few actual days sorting things like that out just an arduous (sp) proccess so think it could easily be done. at that point it will be a full time job (if it ever goes that far) at the moment i would hope to buy, rennovate and sell on a 6 month timescale (i would avoid any major re-building works, extensions etc) working about 3/4 days a week and evening there, theres very few things i wouldnt do myself obv applying to building regs.

DannyboyMidlands

"Dream scenario would be (long term, not next weekend!) being able to move from property to property rennovating along the way to earn me an average/decent income. eg 4 properties a year averaging 5-10k profit from each (very basic idea)."

I'm sure I read recently that HMRC are looking to be stricter on this so you might want to have a look at the tax implications of such regular moves. In their eyes this would be a business generating an income rather than you simply doing up your own home.

maninthestreet

So what liquid capital do you have available? What property renovation / building skills do you have?

spadoosh

DannyboyMidlands wrote: »

"Dream scenario would be (long term, not next weekend!) being able to move from property to property rennovating along the way to earn me an average/decent income. eg 4 properties a year averaging 5-10k profit from each (very basic idea)."

I'm sure I read recently that HMRC are looking to be stricter on this so you might want to have a look at the tax implications of such regular moves. In their eyes this would be a business generating an income rather than you simply doing up your own home.

Sorry the moving from property to property should be working from property to property!

Thats what im after doing essentially run it more like a business than rennovating my own home. Definately will not be living in a property im rennovating. Im aware of tax issues, something i definately will not be looking at hiding from but generally im quite tax efficient (polite way of saying i only pay what i have to) and am aware of.

Problem is on the business front is its not very easy to get a mortgage as a business and if i tried my earnings probably wouldnt be suitable as guarantor for a mortgage (assuming its harder to be a gurantor than an average borrower) SO plan was to start small (sole trader style) build up a bit and get the vital experience then more towards ltd!

GMS

How much deposit do you have and what purchase price are you looking at?
What is your income?
Do you have funds for renovation works in addition to a deposit?

spadoosh

maninthestreet wrote: »

So what liquid capital do you have available? What property renovation / building skills do you have?

Right now,
5-7k cash
5-10k bank of mad

In 12 mths i think ill be able to release about 10k on my current property. Obviously based on current figures and expectations but being fairly conservative id say it was realistic.

As for experience...

Worked as a labourer for a year, worked in diy retail for 8-9years, worked on a barn conversion in france for the last 5 years or so so no proffesional experience but if i had professional experience i wouldnt be asking the questions and you cant be a 'proffesional' property developer without having done it.

Im not a chancer who wants to make a quick buck im after a career in property developing, i can still see a profit in it form where i am just need to know how to overcome the first steps. The barriers to entry seem greater than they were 10 years ago, 10 years ago people wouldnt have even asked this question!

spadoosh

GMS wrote: »

How much deposit do you have and what purchase price are you looking at?
What is your income?
Do you have funds for renovation works in addition to a deposit?

Properties im thinking about are about £40-60k needing fair renovation not restructuring.

Looking in about 12 mths time so think i could have about £15-20k without parents and think theyd be willing to lend/invest £5-10k so a fair contingency if needed.


o income

mines is about 18k and g/f is about 25k, 93k mortgage no other finance. I know we might be pushing it with income and affordability but we could easily afford another £400 on mortgage payments looking at our cash flow an i/o mortgage on 40k would only be circa £200 (aware of other costs)

GMS

Do you have an income now?

Development finance is the obvious route but you would need 40% deposit plus enough to get renovations underway. You may struggle to raise finance on low end value properties due to the added risk for the funder.