Funding a property purchase with a bank loan

PSNE

ACG wrote: »

A property can not usually be purchased more than once in a 6 month period. There is no law against this, its usually a lenders condition - so a cash buyer for example would have no problems.

I think as far as raising the finance you would stand a better chance of getting bridging/development finance. The downside if your potentially going to be stuck with this for 6 months and it will not be cheap (circa 10-15% interest). The positives are that you can do it on an interest only basis and its easier to arrange than a mortgage.

Ignore your credit score its not a massive issue on bridging. The biggest issue will be the low purchase price.

I think you should get your credit reports down to a mortgage broker and get them to do some work for you. Im not sure if there will be an answer, but i am sure it will not be in the form of a loan from your bank.

This option of a bridge finance is something I have read about before on another thread. From my understanding of them they are can be used for up to a period of 12 months then require a more standard type of mortgage to take over from it. If I were to have a higher value property by funding through a bridge finance option will it be then easier to remortgage as the property value will be higher?

PSNE

Pixie5740 wrote: »

You might find it difficult to get a loan being a director of companies that have been trading for a short time. I'm self-employed and when I was looking for a loan I could only get one if I was a home owner, which I'm not so I never got a loan despite my bank repeatedly telling me what a great customer I am.

Yes this is the situation I am facing at the moment. I have good cash flow overall and all credit I have is paid perfectly every time. I have discovered that my credit score is effected by my Electoral Role registration which has not been updated (just sorted it now!) Everything else looks good and income is fine. I have been involved in property renovation when younger and did well from it but its so much harder to get the funds required now.

PSNE

The properties low priced because they are going through auction and in general poor condition. I am in the building trade and run a property Restoration busy carrying out this type of work for Landlord and Estate Agents. £5k-7.5k is an estimate at present based on what I have seen but selecting the correct property and location are key.

vectistim

Have you checked what these sorts of things are actually selling for, as opposed to the guide price? A low guide price is often put on the auction listing to attract people in. I went to view one once that had a really low guide price and the number of people crawling all over the place at the open viewing session was ridiculous. It ended up selling for 5-6 times the list price.

Do a dummy run first - look at a catalogue and select one (or maybe two) properties. Go as far as you can without spending any money. Go and look at them, do some back of an envelop calculations to work out what they would be worth to you, and keep that figure in mind, then turn up at the auction and keep your hands in your pockets and watch (I think watching may be possible via the interwebs for some auction houses now)

PSNE

vectistim wrote: »

Have you checked what these sorts of things are actually selling for, as opposed to the guide price? A low guide price is often put on the auction listing to attract people in. I went to view one once that had a really low guide price and the number of people crawling all over the place at the open viewing session was ridiculous. It ended up selling for 5-6 times the list price.

Do a dummy run first - look at a catalogue and select one (or maybe two) properties. Go as far as you can without spending any money. Go and look at them, do some back of an envelop calculations to work out what they would be worth to you, and keep that figure in mind, then turn up at the auction and keep your hands in your pockets and watch (I think watching may be possible via the interwebs for some auction houses now)

I am going to visit an auction next week after checking out a number of problems so your advice is very good. I was not aware you could do this via interwebs but will certainly save lots of time and let me see more of them first. Ill check this out. I have not checked what they are selling for because this is day 1 of researching this. I have done calculations based on what they sell for so thanks for the advice.

ACG

PSNE wrote: »

This option of a bridge finance is something I have read about before on another thread. From my understanding of them they are can be used for up to a period of 12 months then require a more standard type of mortgage to take over from it. If I were to have a higher value property by funding through a bridge finance option will it be then easier to remortgage as the property value will be higher?

You need an exit strategy on a bridge, if you intend to keep it then it would be a Mortgage. If you intend to sell then just tell them you will be selling it and that will be fine.

Im assuming you mean the property you are doing up will be worth more, in which case potentially (depending on the value of the property).

[Deleted User]

PSNE wrote: »

I have calculations based on a fast turnaround with time included for a slow sale however the 6 month issue is a new obstacle to investigate and calculate further. I have other an option of including investors but want to avoid this if possible as this will deduct from profits.

The sort of business you're thinking about (buying properties cheap, fixing, then reselling for profit) is a risky one because of the possibility of being unable to sell down the line, for this reason trying to finance such a business with consumer credit is playing with fire.

You would be much better off treating the first project (and maybe the second and third) as learning exercises, not profit generating endeavours, and if your goal is just to learn then going through investors makes the most sense (because reduced personal liability) and then long term you can start turning this into a proper business that can generate wealth for yourself.

There's a forum regular (I think it was phoebe1989seb?) who has mentioned before how they lost a significant sum of money on one of these projects, hopefully they'll be along soon to give you some thoughts.

If all you have to hand is ~£5000 and plan to fund the work with credit cards, this is a really bad idea that will most likely lead to bankruptcy and/or losing all your hair from stress.

ACG

citricsquid wrote: »

The sort of business you're thinking about (buying properties cheap, fixing, then reselling for profit) is a risky one because of the possibility of being unable to sell down the line, for this reason trying to finance such a business with consumer credit is playing with fire.

You would be much better off treating the first project (and maybe the second and third) as learning exercises, not profit generating endeavours, and if your goal is just to learn then going through investors makes the most sense (because reduced personal liability) and then long term you can start turning this into a proper business that can generate wealth for yourself.

If all you have to hand is ~£5000 and plan to fund the work with credit cards, this is a really bad idea that will most likely lead to bankruptcy and/or losing all your hair from stress.

I completely disagree. Who can afford to take out a year or 2 and buy property to give it a try? This is something you cant really afford to get wrong and you need to do the proper research from the outset.

I have done up 2 properties, the first i bought just before the crash and sold just after it - after fees and everything else i made about £500, instead of around £10-12k i was expecting.

The second i did better on and the one im working on now i bought just before the market started to pick up and am looking to make around £25-30k although could be more by the time im finished.

You sometimes have to take a risk but if you do the research its an educated risk. My first property involved running up credit cards and relying on money had not yet earned - i made a mistake but came out of it ok. Turns out i did 6 months worth of work blood sweat and tears for £500 but the lessons and skills i learnt were far more valuable.

Bantex_2

It appears that OP is going to buy a property for less than £20,000.

Will that be sellable even if done up?

[Deleted User]

ACG wrote: »

I completely disagree. Who can afford to take out a year or 2 and buy property to give it a try?

I didn't say that, I said he should take the investor money he has access to because taking home a potential £5,000 with no personal liability for the costs is worth far more than a potential £10,000 with full personal liability for £40,000 if things go wrong.

If the project is successful for his investors they're going to be queuing up to invest again and again, he will be able to expect a larger share of the profit in future while retaining no personal liability for the funds. Then as the number of successful projects grows he can start funding them himself, retaining full ownership of all profits and still no potential for massive consumer debts.

If he has the ability to take investment money it makes no sense to instead opt to fund this project with credit he'll be personally liable for.