100% Equity

INHERITANCE

I am fortunate to have 100% (200k) equity on my home which I inherited. When the market is right, I would like to get an additional property as a renovation project which I will sell once finished but am unsure how to fund it.
I only earn 20k per year and have 3k debt.
Average 2/3 bed house here is 200-350k. I am patient enough to wait - keeping an eager eye on the housing market as I would like to take advantage of slump if at all possible. I would aim for the renovation to be turned around within 12 months.
I don't know what kind of finance I could get. I would rent out my current property (live with friends/parents/ in a caravan) which would give me an additional £650+ per month. I also know I could get 70k mortgage based on my earnings.

Does anybody have any suggestions for me please?

silvercar

Problem is making a profit in a falling market.

Say prices fall 15% over a year, you find a wreck for 120k that would be worth 200k in good condition.

You borrow 150k somehow, 120k to buy and 30k to renovate. Over a year the interest would cost you nearly 10k. When you come to sell it, the property has dropped from 200k to 170k. With your 10k interest costs plus buying and selling costs (legal = 1.5k say, estate agent 2.5k), your profit is now 170-150-10-4=6k. Really not worth the risk.

Doozergirl

Sell up. Buy a new house with the equity and a mortgage. Unless you BTL but unless you really know what you're doing then I would buy a house, live in it and fix it up as you go. At least that way it's your primary residence and not subject to tax.

At the point you decide that you're doing okay and you can make it work, then I'd consider owning two properties but for a novice it would be hard going and a potential disaster to do so. We've only just got to the point that we feel comfortable with owning more than one house on a permanent basis.

It's about buying at the right price and finding the potential in a property. Just buying a mess and fixing it isn't really worth it. To make decent money you need to
a) Buy something cheap enough that theoretically you should make money just by selling it on again doing nothing.
b) Be able to do the work much more cheaply than the average person.
c) Find extra potential in the property. Ideally space to extend.

It's really hard to find the right property. b is a given but I need all three of those boxes ticked before I'll touch something.

And we were lucky enough to make our mistakes on our own houses in a strong market. I don't think we'd start out now.

INHERITANCE

Thank you.
I am trying to find a way to grow/maximise what I already have so any views from anyone will be read and considered.

INHERITANCE

Also does anyone have any advice (good or bad) on Renovation mortgages?

kje_2

Are there many renovation projects in your area ? I look around where I live and most houses have already been done. There's one or two that could do with a new roof and windows but replacing those isn't going to add a huge amount (in a falling market) to the value although it may make them more lettable. If you are sure about doing it then could you sell your property, downsize and use the equity plus mortgage for your project ? If I was in your position I'd stay put and put money into savings with no risk.

SquatNow

INHERITANCE wrote: »

Thank you.
I am trying to find a way to grow/maximise what I already have so any views from anyone will be read and considered.

In the current market there is no way to do that.

What you're looking at doing is what people were doing in the rising market.

They would buy somewhere, wave a paintbrush at it for 6 months, and sell it on for the profit thinking they had improved it, whereas all they had done was sit on it for 6 months and pick-up 6 months house-price inflation.

But as I said, doesn't work in the current market.

1 Slight chance you have... sell the house you have now and rent, then use the cash to buy AFTER the crash, in about 5 years time.

Anything else you do is as good putting the money in a bin and setting light to it.

WTF?_2

INHERITANCE wrote: »

I am fortunate to have 100% (200k) equity on my home which I inherited. When the market is right, I would like to get an additional property as a renovation project which I will sell once finished but am unsure how to fund it.
I only earn 20k per year and have 3k debt.
Average 2/3 bed house here is 200-350k. I am patient enough to wait - keeping an eager eye on the housing market as I would like to take advantage of slump if at all possible. I would aim for the renovation to be turned around within 12 months.
I don't know what kind of finance I could get. I would rent out my current property (live with friends/parents/ in a caravan) which would give me an additional £650+ per month. I also know I could get 70k mortgage based on my earnings.

Does anybody have any suggestions for me please?

If you can get a price close to the peak of your local market I'd be tempted to sell but be quick and don't chase the market down.

However, if your local market is falling sharply then since you have 100% equity and no mortgage to service I'd think about letting the place out to get a steady income. Do your research first into the responsibilities and pitfalls of letting though.

From the sounds of things you don't really need the money from a sale so letting it out now could be a nice addition to your income stream.