BTL Venture

MoneySaverMick

Hey All,

Posted about a month ago regarding getting my first BTL property.
Continuing to save but i’m going to need to re-mortgage and pull about £30k equity from that to cover costs/fees and the deposit.

Properties i’m looking at are around £70k which will need the 20/25% deposit but i’m wondering if i’ll still get another mortgage to fund this 2nd property? Essentially i’m getting the deposit from borrowing extra on my current property and then borrowing more again on a 2nd mortgage. Is this all a legitimate strategy of funding my first BTL?

I’m also looking to buy at auction so don’t know if that causes further issues with funding? Any advice or suggestions would be great.

Thanks

Mick

Gwendo40

Are you not aware/concerned that the government are (entirely justifiably) targeting highly leveraged ''property entrepreneur'' wannabes?

00ec25

so why have you not spent the last month talking to mortgage brokers?

read any of the many treads explaining about auctions and their pitfalls?

search function?

Doozergirl

I typed out a long reply last night but lost it.

Don't do it. They're the worst kind of houses with low returns because you have a poor quality of tenant and usually a high turnover as they move from one set of rent arrears to another. The house needs to be of a good standard to attract tenants because competition is high.

Repair and maintenance costs are massive compared to the value of the house and HPI just doesn't seem to happen in these relatively depressed areas. Your repair bills are also higher, again, because of the quality of tenant. You'll get some good ones, you'll definitely get some bad ones.

If it's cheaper to buy a house than it is to actually build one, a place has got issues.

You're borrowing the full amount, so have no money to invest. You will be taxed on the income even if you're not making anything over what you bring in. You will be subsidising the house - you may as well save/invest/put it in a pension tax free and do both. £70k over 25 years is only £233 a month in savings. Less if it's in a pension.

tom9980

MoneySaverMick wrote: »

Hey All,

Posted about a month ago regarding getting my first BTL property.
Continuing to save but i’m going to need to re-mortgage and pull about £30k equity from that to cover costs/fees and the deposit.

Properties i’m looking at are around £70k which will need the 20/25% deposit but i’m wondering if i’ll still get another mortgage to fund this 2nd property? Essentially i’m getting the deposit from borrowing extra on my current property and then borrowing more again on a 2nd mortgage. Is this all a legitimate strategy of funding my first BTL?

I’m also looking to buy at auction so don’t know if that causes further issues with funding? Any advice or suggestions would be great.

Thanks

Mick

You were given good advice last time but didn't listen.

Buying at auction is for cash buyers with deep pockets, experience and the ability to do their own renovations. You possess none of those attributes.

Rethink your entire plan.

need_an_answer

Whats the reason behind buying at auction?

Hopefully you have not been influenced by the likes of Martin Roberts and Lucy Alexander....

Comms69

MoneySaverMick wrote: »

Hey All,

Posted about a month ago regarding getting my first BTL property.
Continuing to save but i’m going to need to re-mortgage and pull about £30k equity from that to cover costs/fees and the deposit.

Properties i’m looking at are around £70k which will need the 20/25% deposit but i’m wondering if i’ll still get another mortgage to fund this 2nd property? Essentially i’m getting the deposit from borrowing extra on my current property and then borrowing more again on a 2nd mortgage. Is this all a legitimate strategy of funding my first BTL?

I’m also looking to buy at auction so don’t know if that causes further issues with funding? Any advice or suggestions would be great.

Thanks

Mick

No idea; it depends on your income, amongst other things.


BUT you're a first time landlord, you haven't got a property in mind and you're going to buy at auction. - this all screams stop.


Have you done your sums, is there a profit to be made?

saajan_12

MoneySaverMick wrote: »

Hey All,

Posted about a month ago regarding getting my first BTL property.
Continuing to save but i’m going to need to re-mortgage and pull about £30k equity from that to cover costs/fees and the deposit.- on a 70k property, 25% deposit is 17.5k. If you're spending 12.5k (to get to 30k total) on costs / fees, thats a total £82.5k on an asset that will immediately be worth £70k upon completion. It needs to appreciate 18% before you make your money back on fees.

Properties i’m looking at are around £70k which will need the 20/25% deposit but i’m wondering if i’ll still get another mortgage to fund this 2nd property? Essentially i’m getting the deposit from borrowing extra on my current property and then borrowing more again on a 2nd mortgage. Is this all a legitimate strategy of funding my first BTL? - yes, in theory if the lender thinks your income can cover the residential mortgage and the expected rent income they assess will cover the BTL mortgage (or some multiple of). You still need to check it will be profitable after realistic rent, voids, repairs, full mortgage interest on the residential and BTL mortgages.

I’m also looking to buy at auction so don’t know if that causes further issues with funding? - yes,
1) with the mortgage it will take them however long to check your finances, get searches from your solicitor, hold survey, extend mortgage offer and draw down funds. With an auction you will likely have to commit on the auction day, and ahve ~28 days to complete, so if you don't get a mortgage by then (or indeed don't get one at all) then you'll lose your deposit and may have further costs to pay.
2) On the 'sensible idea for you' front, are you experienced enough to see from a brochure whether a property is a good one, without the time to run surveys / searches? If it does turn out to need more work to make it habitable, can you fund that? Any advice or suggestions would be great.

Thanks

Mick

In general, the mortgage is possible provided you've done your sums considering:
* realistic rental income
* voids (10%?)
* repairs (10%? more if its a cheap property?)
* agent costs
* gas cert, etc
* insurance
* mortgage interest on deposit and BTL
* tax on profit BEFORE interest costs, only partial relief on financing costs

After alll that do you still make a profit? Thats based on averages, but do you have the capital to withstand a particularly bad year?

Specifically on the auction front, you commit to the purchase at the auction so if the property isn't mortgageable or you can't get the checks done soon after, you risk losing your deposit + costs. Would you have the capital if the property needs more work?

Advice would be to do your sums and buy a property the conventional way, not on auction. If that makes it too expensive, then invest elsewhere