First-Time Property Developer - Finance

simonabc

I'm currently working shifts full time but get quite a lot of time off work and I have decided that developing property is the way forward for me.

I currently have an £85k mortgage on a £120k house although as I earn only £26k a year I feel that I am at my limit with mortgage payements. Ideally I would like to keep this house rather than living in a development.

I have no credit cards or loans and I have no overdraft so I expect my credit rating will be pretty good.

My problem is knowing how to get funding to proceed with buying a property and financing the renovation.

I'm looking to buy a property for approx £80-£120k and to spend approx £10-£20k on the renovation. What deposit would I need if any? Would I need to write out a business plan? Could I add the mortgage payments for the property to the renovation budget?

I have the contacts for renovation ie plasterer, plumber, electrician etc but need some advice on the best way to proceed with my idea.

Thanks in Advance

Simon

Doozergirl

You're going to need put your own money into it. As you've only got £35,000 realistically, I think that money has to go into your development.

There are just a hundred reasons why, if you intend to do this that you should sell up your current house and let your development be your only house. At that price point, with another job to cope with, your interest payments will eat very quickly into any profit you would expect to make.

simonabc

Thanks for that.

The only reason I didn't want to live in the development was that I can get it done quicker and so there will be less mortgage payments.

Thought I might be able to get a business loan if i do a business plan.

Si

Doozergirl

There will be less mortgage payments if you only have one mortgage!

The mortgage payments are a legitimate expense when you need somewher to live. There's also the completely unquantifiable length of time it takes to find a buyer and subsequently sell.

It does take longer when you live in it, but it also takes longer when you work somewhere else. If you're a single guy, you can have far less impact living in a build than a family would.

I lived with a futon, a portable TV, a tiny fridge, a microwave and an upturned waste paper bin with a cushion on it for a chair until three days after my baby was due. He arrived two days after that!

Start small, make your mistakes whilst taking lesser risks to start with, build up your equity and experience then go to the bank with the business plan.

simonabc

Doozergirl wrote: »

There will be less mortgage payments if you only have one mortgage!

The mortgage payments are a legitimate expense when you need somewher to live. There's also the completely unquantifiable length of time it takes to find a buyer and subsequently sell.

It does take longer when you live in it, but it also takes longer when you work somewhere else. If you're a single guy, you can have far less impact living in a build than a family would.

I lived with a futon, a portable TV, a tiny fridge, a microwave and an upturned waste paper bin with a cushion on it for a chair until three days after my baby was due. He arrived two days after that!

Start small, make your mistakes whilst taking lesser risks to start with, build up your equity and experience then go to the bank with the business plan.

Ok good advice, there is a possibilty of moving back in with parents for a short time anyway so I might do that, sell my house and put the £30-£40k in as my deposit.

So is that what you do for a living now?

I have a good contact who is an estate agent which I believe is half the battle.

Si

clutton_2

"""I have no credit cards or loans and I have no overdraft so I expect my credit rating will be pretty good."""

oddly enough - this could be to your disadvantage - if you have had no credit, and therefore are unable to show a Mortgage Lender that you have borrowed money in the past and repaid it on a regular basis - you could have problems getting a l oan - bizarre or what ???

Pobinr

The interest alone on commercial money for a year will be about 10k. You don't have enough behind you to do this. The bank will only lend to 70% LTV. Move to a tatty place & do it up is your only hope. That way you won't pay CGT.

nelly_2

clutton wrote: »

"""I have no credit cards or loans and I have no overdraft so I expect my credit rating will be pretty good."""

oddly enough - this could be to your disadvantage - if you have had no credit, and therefore are unable to show a Mortgage Lender that you have borrowed money in the past and repaid it on a regular basis - you could have problems getting a l oan - bizarre or what ???

He has a mortgage though

simonabc

clutton wrote: »

"""I have no credit cards or loans and I have no overdraft so I expect my credit rating will be pretty good."""

oddly enough - this could be to your disadvantage - if you have had no credit, and therefore are unable to show a Mortgage Lender that you have borrowed money in the past and repaid it on a regular basis - you could have problems getting a l oan - bizarre or what ???

I have had loans, credit cards and an overdraft in the past but all are paid off now. I have also never missed payment on a loan or my mortgage.

simonabc

Pobinr wrote: »

The interest alone on commercial money for a year will be about 10k. You don't have enough behind you to do this. The bank will only lend to 70% LTV. Move to a tatty place & do it up is your only hope. That way you won't pay CGT.

I think you are right although i'd be planning to turn over the propery in 3-4 months if I wan't living there.

Although i know If its on the market for any period of time though my profit would be begin to disappear.

Doozergirl

simonabc wrote: »

So is that what you do for a living now?

I have a good contact who is an estate agent which I believe is half the battle.

It is. And we even sold up and rent our house now because it's less risk, considering how volatile the market can be and it's obviously cheaper to use money you have than to borrow more from the bank. We can get a half decent rate now; bit more than the average mortgage but less than the average business rate certainly.

Don't just stick with the one agent, obviously. The more places you look, the more chance you have of finding a real goodun.