What's the Best Mortgage for Property investment?

tntunited

After saving up small amounts of cash whilst living in wales, my wife and i will be seeking to buy property here to do up and sell on,..... however it isn't easy knowing the best mortgage or loan for doing a cheap renovation job!
Anyone willing to help with ideas gratefully appreciated.:T

This will be our first ever purchase and io have the know how on development but just am stuck as to how to go about the purchase as we are short of more than a few bobb... plus the expense of renovating these properties in order to settle for our one day dream land purchase for one of those swiss built homes.:j

jessicamb

I'll move your thread to the mortgages board where you should get more responses.

tntunited

Just wondering how to vieew it and what forum would it be exactly.. Mortgage and endowments or new home buyers etc..
Cheers

JoeK_3

Lets look at the classic case of buying a small terraced property with potential. The fees for the purchase will be as follows:-

• Initial Purchase Costs - £75,000
• Initial Surveyors Fees - £200
• Purchase Solicitors Fees - £400
• Improvement Costs - £3,000
• Cost of Sale (Estate Agent) - £800
• Solicitors Fee (Sale) - £300 (approx.)
• Total Cost - £79,700

On the assumption that the property can be sold for around £90,000 - £95,000, the property developer could make a tidy net profit of between £10,300 - £15,300 and depending on the timeframe from purchase to sale, this could be the equivalent to earning of around £50,000 to £60,000 per year.


All this is well and good if you have the capital to be able to buy the property for cash but what if you haven’t. Well, let’s assume in this case that the property developer can only lay his hands on £25,000 as a maximum. This is how this could work: -

• Initial Purchase Costs - £75,000
• Initial Surveyors Fees - £200
• Purchase Solicitors Fees - £400
• Improvement Costs - £3,000
• Cost of Sale (Estate Agent) - £800
• Solicitors Fee (Sale) - £300 (approx)
• Total Cost - £79,700

Plus the cost of borrowing:
£56,250 for say 3 months - £2,109
Less extra Solicitors Fees - £500
Loan Arrangement Fees - £1,125
Total extra cost of borrowing - £3,734


Based on the assumption that the property developer was borrowing 75% of the property value for a three month period would reduce the profit margin to a net profit of between £6566 - £11,566.


This hypothetical situation shows that ideally the property developer is better off financing the scheme from their own funds but as well as this profits can still be earned even though the majority of the money is borrowed.

Do you have any equity to release from anywhere for the deposit?

JoeK

tntunited

Cheers Joel, i have only just got my computer working! We've really found all this information very useful, so thanks very much. Cheers again, we'll keep this Thread, posted of any near fututre events regarding thi