BTL advice needed - unusual circumstances

Jaxer

I'll be purchasing a run-down property from my parents in the next month or so. The sale price will be £175K (in view of the current dilapidated condition) but I will pay only £40K on completion with the balance payable "on demand". I will then convert the property into a flat and lock up shop.

I have 2 options in my mind:

1) To raise the £40K through my own means and acquire the freehold in my name. I would then bring the property up to a reasonable standard and look to raise a BTL mortgage prior to letting. The mortgage would be to consolidate existing borrowing and release equity.

2) To look to raise a BTL mortgage at the outset to cover the cost of the initial £40K plus a further amount for renovation.

The second option is preferable but I'm not sure how a mortgage provider would treat the £175K sales price vs the £40K payment. I also currently have around £45K in personal debt (credit cards/loans) although I've never defaulted in payments and have a "clean" credit history. The third factor is that I currently operate through my own company and my income compromises a variable level of dividends plus low base salary.

I'd be interested to hear from any mortgage brokers who may be able to help in this situation. I'd be happy to discuss fees/commissions if you send me a message.

Leon_W

Firstly, you're right, that's an absolute minefield.

If I've got this right, the property is run down and a flat/shop. If they are on one title then I don't hold out much hope of a BTL mortgage and would probably go down the commercial financing route (possibly bridge depending on works timescales). Once the property is up together it may be possible to switch the flat to a BTL and release capital with the shop owned outright.

BTL mortgages are not designed for improvement projects such as you suggest. You need a loan + drawdown facilities which I think you'll only get commercially on that type of property.

All the best