Buying a rundown property

Uranium_star

Hi,

We are in a good position as our property sold very quickly for near asking price. The vendor is now pushing us to move quickly and apart from a real project we have found nothing to move into.

My question is as follows:

We could afford to pay £270k for the project property and hold back enough equity from our sale to complete half of the works to make this a perfect property. Once we had completed the first works the property because of its location and land would be worth much more. Would I at that point be able to get a revaluation to lend more money against to complete the project?

Can anyone see a downside to this or any potential pitfalls?

Thanks - getting desperate !!

kingstreet

Is the property suitable security for a mortgage?

If the lender holds a retention (holds back some of the mortgage money until essential repairs are completed) do you have enough to bridge the retention, to enable you to buy the property in the first place?

You may be able to remortgage later, in which case you should go for a penalty-free mortgage product at the outset but much will be determined by the condition of the property and your ability to deal with a retention.

Better_Days

I have no idea if you would be able to do this, why not have a word with a mortgage broker?

The main advice I would give is to very carefully cost out the works, and also retain a contingency (which you don't tell your builder etc about). Don't forget the considerable inconvenience of living through renovations.

Uranium_star

The property is suitable security for a mortgage - the current owner bought it cash at auction to stop investors purchasing and building flats next to his own property. They have had some underpinning done to ensure the property is mortgageable and have documentary proof.

If we do decide to go for it we will rent and whilst the work is going on so we are not too inconvenienced. The property is in an ideal location with a very large plot of land which has had planning permission now lapsed to build another property.

I am really tempted - thanks both for the advice.

kingstreet

How long has it been owned by the current owner?

If less than six months, some lenders won't accept a mortgage application on it until the six months has passed.

Thrugelmir

Uranium_star wrote: »

We could afford to pay £270k for the project property and hold back enough equity from our sale to complete half of the works to make this a perfect property.

Unfinished works may well depress a properties value rather than increase it.