1st Buy to Let/Sell - Advice Required

mmedia

Hi,
I am looking into buying our first Buy to Let/Sell with my one of my parents.

The property we have an interest in is a repossession that is across the street from my parents house. I actually live in the same street, so having the possibility of our first project in the same street and it is in a great desirable location seems ideal.

The property is a 2 bed semi built around 1997 and it has never been updated since new, so really it would require new windows, kitchen, bathroom, carpets and decoration and possibly boiler. The house is identical to my parents and our house which is in the same street.

My parents own their house outright and i currently rent. We both have a considerable amount of savings, possibly 50k plus which is currently sitting in instant savings accounts and ISA's earning around 1% or so.

On research, the house next door sold a few months ago for £115k and is in a similar condition to the one that has just been repossessed.


Now what we are looking for is the best way to finance this project or any first timer advice.

A new Buy to Let mortgage and large deposit? Repayment or interest only? Save some of the savings for refurbishment? We may need to keeps some savings for another project?

Or course there are many options and things to consider, but going into this with good advice from you guys would be of great help.

By the way, some of the refurbishment work can be carried out by myself as i have work in various trades and have my own Van and tools.


Any advice would be great!

Thanks.

ACG

Your question is very vague, you need to come up with a plan on what it is you want to do. We can then help you with how to best achieve it.

Do you want to buy, renovate and sell or do you want to buy, renovate, and rent?

Stamp duty kicks in at £125k, do you think after purchasing for £115k and spending however many thousands the property will increase up to the stamp duty threshold or beyond? If only up to stamp duty then i suspect this is a property for you to rent as there would not be enough in it to make a decent enough profit otherwise.

For I/O v Repayment - again, what do you want? Do you want an income or do you want to build equity?

You can look to do whatever it is you want with the savings you have in place, but you need to decide what it is you want to achieve.

It might be worth sitting down with a broker, going through some figures and options and this should help you with making a plan.

Personally i would come up with my plan and then find a property that would help me achieve it - rather than buy a property and make a plan around it.

AlexMac

If you are dead set on this plan and this 'accidental' choice (as opposed to the advice above about looking around for a property with more profit based on finding one with more potential for added value) then go for it .

As you don't own a house yet, you could even buy it as your own 'primary residence', with a cheaper owner occupier mortgage (rather than a higher % BTL one) with a bigger deposit (from bank of mum and dad- assuming they trust you) and consequently lower interest rate. You can worry later about translating this to a BTL with your lender's permission if you decide to let it out as opposed to selling it on. The taxman won't think it odd or that this is a development business if, for example you sell after a year, or unless you flip several properties in quick succession.

I did this in the late 20th Century, buying a 100-year old wreck for two-thirds its value at auction, spending £25k on everything from new roof to plumbing/rewiring and bath/kitchen/flooring and total redec, then more than doubling my money when I sold 2-3 years later. But then, house price inflation was much higher in the 1990's than even yesterday's 18%+ forecast over the next 3 years from the Office of Budget Responsibility (page 5 in today's Daily telegraph.)

The caution I have is that as another post, above implies, there will probably be a ceiling price for the street, and if the houses are only 20 years old, they can't be in such poor condition that they will sell for much less than they are worth. Put another way, will the £15k you might spend on windows, boiler, bathroom & kitchen really yield a profit of more than a couple of £k after factoring in the costs of conveyancing, loan finance and ultimately, agent's fees and legal costs of selling (also a few £k) and your own time?

But if even half the OBR forecast is correct, buying a house- ideally the cheapest one in the best street, will be a good decison right now- good luck