Wanting to release some equity from my home/portfolio to purchase another property?

James192

Hello,
Quick background, 34 years old with a background of being a Commercial Pilot then owning a Commercial Flying School.
I own my own house (valued recently @ £325K) mortgage free and own 2 commercial properties mortgage free (valued recently @ £465K) which brings in a combined income £34.5K per annum. The leases for the properties have 9 years on them with a rent review every 3 years (one coming up in just over 2 years). I also do some buying/selling of antiques which brings in about £12K a year so total income of around £46.5K p/a before tax. My outgoings are the regular such as council tax, utilities etc, no dept and over £100K in the bank. I have a credit card which I pay off monthly and also a mobile phone bill.

The property I would like to buy is £213K and would like to release £163K from my main home and pay the rest (£50K) in cash. The property is split into a shop downstairs and a flat upstairs. Flat is to be let out on a yearly contact of £650 per month (£7.8K p/a). The shop shut last year which due to the owner having other interests closed it down and let the flat out to there son (who is wanting to sign a yearly contact). I did a basic mortgage calculator and it ended up being around £650ish per annum for the first 2 years then raising to just over £700 which is covered mostly by the flat income (but I can afford to pay it anyhow). The shop has outline planning to be either tired into a 2 bed flat like above (I would pay for costs) and then rent it out for contractors/holiday lets etc which should bring in way over £12K (its 1 mile from lake Windermere and there is lots of contractors who use this area for BAe Systems etc for accommodation). The other option was to et the shop out as it is for £11K to a couple who are interested but I am more likely to work part time doing it with staff also.

I would buy the property outright myself but I like to keep some £ as savings and I also have my eye on an other 2 bed flat to purchase also hence only using £50K for this. My only concern is around 4 years ago I fell ill and was in hospital and defaulted on a credit card (I payed it off as soon as I was better). Will this effect my borrowing at all? That is my only bad credit bit. Surely I am in a position to borrow £163K when I have over nearly £1m in capital and a combined income of £46.5K p/a before tax? Also, I spoke to a mortgage broker and I said I was releasing equity and there would be no problem, it would only be a problem (business plans etc) if I was putting down a deposit of £X amount to buy. Should I go with the broker or could I bypass him and just go straight to a recommended lender?

Many thanks in advance.

princeofpounds

Go to a proper independent broker with experience of dealing with both residential and commercial mortgages so you have full analysis of your options.

It is rarely cheaper to go direct to a lender, so there isn’t much point in bypassing them. Most lenders run a suite of offers only for brokers and if you I go direct they’ll often charge you similar fees anyway.

It sounds like you would be able to borrow that amount of money as you have the property to use as security and you have the income.

Your credit card late payment may affect what you are offered slightly but not much. I wouldn’t worry about it.

If you don’t mind me asking, how did you end up with so much property so young? Your income is good but not multiple commercial property investments good.

James192

princeofpounds said:

Go to a proper independent broker with experience of dealing with both residential and commercial mortgages so you have full analysis of your options.

It is rarely cheaper to go direct to a lender, so there isn’t much point in bypassing them. Most lenders run a suite of offers only for brokers and if you I go direct they’ll often charge you similar fees anyway.

It sounds like you would be able to borrow that amount of money as you have the property to use as security and you have the income.

Your credit card late payment may affect what you are offered slightly but not much. I wouldn’t worry about it.

If you don’t mind me asking, how did you end up with so much property so young? Your income is good but not multiple commercial property investments good.

Thank you very much for all the information.

Sadly I would rather have my family than the capital. In the last 5 years I passed my flying school business (and shares) in Oxfordshire to my business partner (and took my stake in the company) to look after my Mother and Grandma who both passed away in the last 5 years. I would much rather have them here and me still running the business but that's life I suppose. I walked away from the flying school just north of £150K and then looked after my families properties while working park time as a landscaper and dealing in antiques. 

Im now in a situation where I work part time and bring in enough money but I'm bored and want to expand you see. So in the near future if this goes ahead I will incorporate 2 companies: JAG Properties Ltd (for 2 commercial and 2 residential) and JAG Retail Ltd (shop). Im not sure if its best for JAG Properties Ltd to collect rent from JAG Retail Ltd or keep JAG Retail Ltd separate?

So you think it's better to let the broker deal with it all instead of me? Like I said, I have my eye on an other property (long term rental) and I want a nice amount sitting in the bank as savings etc hence only putting in £50K of my own cash and spending around £15K on stocking/fitting out the shop/post office.

Angela_D_3

Definitely go to a broker,  the trickery and magic they perform is worth every penny