Financing a property trading business

SarahB16

johnweir123 said:

BarelySentientAI said:

johnweir123 said:

BarelySentientAI said:

The deposit, purchasing costs and refurbishment costs for one property.

Is there no 'financing' or mortgage options people use to get started? 

Yes, which is why I said deposit and purchasing costs rather than purchase price and purchasing costs.

Or are you hoping that someone just gives unsecured loans out to anyone who fancies having a bash at being a developer?

Sorry, misread your 'purchasing costs' bit as the purchase cost for the property. 

So we'd be talking about a typical sort of 10% of the value of the property as a deposit and the rest would be mortgaged? 

As others have said whoever is providing you with the development finance would expect you to contribute in the region of 20-30% of the total costs.  This could be in the form of the land/property you own/are developing (i.e this would be valued to see if it's provides the 20-30% required) and if does not meet the minimum percentage you would need to provide more cash towards the costs up front.  You would allow whoever is giving you the loan to take a first charge over the land/property (i.e. highly likely they will want a secured loan) and if things go wrong you run the risk of losing your 20-30% contribution. 

Section62

theoretica said:

The mortgage company will be looking at the worst case - what would the property be worth if someone started building work, knocked stuff down, then ran into problems.  That would probably reduce the repossession value by more than 10%  - so they would insist on more than 10% deposit.

....and a property which has the potential to generate any kind of profit at all is almost certainly going to have a depressed valuation due to condition to start with.

OP, to do property trading/developing for profit needs at least two things... firstly experience, secondly extensive contacts in the trade to get work done on time and to budget.  Without those then the odds of making a profit will be down to luck, and generally more people are unlucky in the game than are lucky. It is a great way of losing money.

Before progressing with the idea, spend some time carefully reflecting on the extent to which you have the first and second, and how you would gain both before running out of cash.