How to Purchase x2 Houses with Low Income

Reusability

PRAISETHESUN said:

I suspect you'll fail on mortgage affordability long before you get anywhere near trying to figure out the logistics of how you'll be a live in landlord at two properties...

Also to keep in mind that the rental income isn't guaranteed. You might get rubbish tenants who don't pay rent, completely trash the place, and then drag you through the courts to get them evicted. How would you cope with the costs of two mortgages in that situation?

As it's a live-in-landlord situation, there would be x1 person(s) per property. Myself in one and business partner in other. Lodgers have different legislation and easier to remove if necessary.

Reusability

DE_612183 said:

what deposit have you got for property2?

at a bare minimum you'd need at least £30k + fees and stamp ( 2nd home is high rate ) - that's got to be £11-12k

We've dumped 99.5% of our savings into PROPERTY_1 deposit (£100k). Therefore, looking for a solution to gather funds to purchase PROPERTY_2. Home Equity Refinance was one method but unsure where to proceed on this, credit cards was antoher.

_Penny_Dreadful

Reusability said:

PRAISETHESUN said:

I suspect you'll fail on mortgage affordability long before you get anywhere near trying to figure out the logistics of how you'll be a live in landlord at two properties...

Also to keep in mind that the rental income isn't guaranteed. You might get rubbish tenants who don't pay rent, completely trash the place, and then drag you through the courts to get them evicted. How would you cope with the costs of two mortgages in that situation?

As it's a live-in-landlord situation, there would be x1 person(s) per property. Myself in one and business partner in other. Lodgers have different legislation and easier to remove if necessary.

In the opening post it was "I" own a property now it's we and the other person is a business partner.  Who actually owns property one?

You really need advice from a mortgage broker, the Mortgage & Endowments board would have been a more appropriate board to post on.  You have a few hurdles to overcome namely low income and high borrowing, furthermore you would find the pool of lenders who will consider future lodger income as part of your affordability.  I'd be surprised if you passed affordability in the first place although the details of your business partner are not known so taking on further borrowing via credit cards is only going to make it less affordable.

You also need to take into account the higher rate of SDLT/LTT/LBTT depending on which part of the UK property 2 is located in.  To have lodgers you need to be living in the same property as your only or main home otherwise you are at risk of creating tenancies.

TBagpuss

Reusability said:

Brie said:

Are you suggesting using a credit card to buy a property?  Doesn't seem feasible to me.

In order to gather funds for deposit. Under a business credit card, the credit score would be under the business and wouldn't affect personal credit scores.

But you would have a personal debt owed to the business instead , which you would have to declare. Any lawyers dealing with the purchase would have to check the source of the funds you were using and report to your lender anything relevant to them. And a borrowed deposit would be relevant to the lender.

Grumpy_chap

This thread is a bit hard to follow.

There are, I think, two people involved.  The OP plus one other. 
There is reference to "combined salary" which tends to read as though this is the OP plus the one other being the OP's life partner / spouse / civil partner / significant other.
The later the other is referred to as a business partner

Can the OP confirm how many people there are involved and what the relationship of the individuals are to each other?
(Of course, the other might be both business partner and life partner at the same time.)

Is the current property owned and lived in by just the OP, or by the OP plus the other?

Is the second property planned to be owned by just the OP or by the OP plus the other?

Where will the OP and the other live once both properties are owned?

Then, the income.
Combined salaries £46.5k (employed income)

Self-employed income £13.5k which only started in the past month
Oddly termed "Bonus salary" by the OP, but it is not really salary at all if it is self employed income.  What is the self employed income after expenses?

OR, is the self employed income even self-employed income at all?
It is just that the OP refers to the same value £13.5k as income from a lodger.  Rental income like this is not self-employed income.
It may be that the OP has employed income plus self-employed income plus lodger income...

Is the OP truly a live-in landlord?
To generate rental income from a lodger of £13.5k on a property with a value around £300k is a very high rate.  That's more akin to the rental income for a full-house rental rather than just a room.

It is unlikely that a lender would consider much of the "self-employed" income as suitable to support borrowing because of the very short period over which this rate of income has been established.  Typically, two-years of accounts would be required for self-employed income to be considered.
Is the self-employed income £13.5k when the past month is extrapolated to a full year?  OR, is the OP saying they received £13.5k self-employed income in the first month?

Then, later, there is reference to using a business credit card, which rather suggests the OP's "self-employed" income may not strictly be "self employed" income but via a Ltd Co owned by the OP (and the business partner).  Lending to a small start-up business would usually require personal guarantees, so would show on the OP's credit record.  Unless it is not a Ltd Co, in which case the lending is to the OP directly as  there is no business to have separate borrowing.

The OP would also have to declare that they had a loan from their business, which would affect the OP's credit history. Plus it may have BIK implications.

Other considerations need to allow for SDLT 2nd property surcharge, CGT.

Can the OP be clear as to exactly how many people are involved and their relationships to each other?
Can the OP be clear as to whether there is a Ltd Co business, or sole-trader, or simply the lodger?

Schwarzwald

Reusability said:

Hi Everyone,

First time poster. Fan of M.L from family watching his content since way back when.

Current Situation: I currently acquire PROPERTY_1. Purchased for £285,000 and now worth £300,000 and have put £100,000 deposit in. Therefore, mortgage for amount of £185,000 (Barclays).

Goal: Another PROPERTY_2 is available at £315,000 that I would like to acquire as well as keep PROPERTY_1. Purchase as main residence.

Personal Info:
- Combined Salary: 46,500 - Permanent jobs.
- Bonus Salary: 13,500 - Only just started to receive this (1m ago). Self employed.
- Outstanding Mortgage Remaining on PROPERTY_1: £185,000

Possible Options:
- Credit Cards under Personal.
- Credit Cards under Business.
- Proportunity (proportunity<dot>com) or alternative loan company.
- Cash Out Refinance (American Term)
- Home Equity Loans (barclays<dot>co<dot>uk/loans/what-are-home-equity-loans)

Note that as soon as we purchase PROPERTY_2 then our salary would increase by £13,500 as live-in-landlord. Currently doing this on PROPERTY_1.

Required Info: How do I maximise the amount of money I can acquire through various methods listed in possible options (and other ways not listed ), so that I am financially eligible to purchase PROPERTY_2 without selling PROPERTY_1.

If anyone is knowledgeable on mortgages, second house mortgages, home equity loans, etc then please comment. I could use all the info.

Thank you.

in short:
- two residential properties with a total asset value of 600k (the mere 5% value increase you state Prop1 has attracted pretty irrelevant)
- only 100k deposit
- no further savings as you "dumped" all your money into Prop1
- total mortgage would be 500k or nearly 11x combined salary
- as your combined salary is only 47, which is pretty low for more than 1 person
- the recent bonus payment pretty irrelevant as it sounds discretionary and was ver recent
- (mis-) use (business) credit cards and other loan types to fund a personal purchase and any related property costs and transaction expenses
- you claim that you "have no other expenditures" other than mortgage debt .... no phone bill, insurances, utilities, internet, transportation, etc?
- assuming 5% interest and some 2% repayment, total 7% that is already 35k mortgage debt service per annum

therefore:
1- I cant see and would actually hope that no Lender would do this
2- unless the OP does not elaborate on why they actually want to do this, this pretty much sounds like a financial suicide mission
3- the OP asked the question to learn which is good, but to be frank, the OP and this whole set up doesnt come across as very financially literate and i would encourage the OP to further think this through

Remember Charlie Munger: “there is only three ways a smart person can go broke: Liquor, Ladies and Leverage” - with the outline approach, i think the OP is setting himself up for the latter 

ayupmeduck

Surely you're looking at a very high monthly mortgage payment on very low in come, I make just below your combined income and will struggle with mortgage payments, I'm seeing well over £1200 a month.

GDB2222

Do you have income from lodgers at the moment? And, the plan is to get more lodgers when you buy the second house?  So, perhaps you should get some sort of business financing that takes into consideration the income from the lodgers?

LunaLater

It’s not going to happen, two people who appear to be on minimum wage can’t borrow that amount of money.

I think working on earning more would be a better use of your time than coming up with fanciful schemes such as this. You’re looking at mortgage payments of £40,000 per year which you can’t get close to affording.