How fast can I get my money out?

THE QUESTION

I know there are limited lenders if you buy a property, refurb it and then sell it within six months, but if I pay cash for a property and want to spend about £10k max on the refurb to turn it into 4-room lets for professionals before getting some money back out and renting the property out, is this feasible?

THE ANSWER

Buying for cash if you can is positive because you have:

1. Zero borrowing costs
2. The ability to complete very quickly (which will ensure you can negotiate the price down to the best you can get the property for).

Having four tenants on separate AST's will reduce your choice of BTL lenders as some only allow a single AST let.

The majority of BTL lenders will not accept a remortgage application until you have owned the property for six months, regardless of your method of purchase. There are a couple that will lend limit lending primarily to purchase price and provable refurb spend, thus trapping perhaps more money in the property than you intend.

Specialist and commercial lenders will not have that six-month limitation, allowing you to apply for a mortgage as soon as the property is refurbed and tenanted. However, they charge higher rate and set up fees than BTL lenders.

The question is; what is your driving objective to release your cash back out of the property with such haste? It may be to fund your next purchase, but how quickly will you find that purchase. Is it possible that your cash will sit idly in your bank until that cracker of a deal appears?

There is an alternative strategy you may wish to consider

• Pay cash for this purchase for all of the benefits detailed earlier
• Wait out the six months to get access to the best BTL rates
• Keep searching for your next deal
• Should you find it within the six months, obtain bridging finance to extract the cash from your original purchase, which gives you the same cash buyer benefits for your subsequent purchase
• Repay the bridging loan with the remortgage of your original purchase when the six months is up and you can apply for a BTL mortgage.

This means that

1. You only incur borrowing costs when you need to
2. You still buy like a cash buyer when the need arises
3. You get the best rate mortgage for the property you want to hold and rent out.

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