There are self-build mortgages, but these aren’t available when you’re building a property for sale or rent.  These are considered to be commercial developments and are financed in a specific way.

The major banks pulled out when the credit crunch hit, with disastrous consequences for many of their borrowers.  They've never really got back into this area of lending again. However, the gap has been filled by small, specifically focused lenders who typically offer this type of finance and nothing else, although a few do offer bridging as well.

In order to deter all but the strongest propositions there are some significant hoops to jump through. These are:

•  They require a high cash input from the borrower
•  The borrower needs to have provable, relevant previous experience of a similar type of new build

If you don’t fulfil either or both of these requirements you’ll need to get creative about how you can meet them.

The Money

This is required...

THE QUESTION

I’m looking for advice on development funding. I have been offered the chance to put in one third for some land - which has planning permission for four barn conversions plus a new build plot. The purchase price of this land has been offered to us for £750k with a GDV for the houses of approx. £3.5m. 

I have a few BTLs, but this is the chance for me to get into development. I would need to borrow £250k for the purchase and more for the build costs and associated fees, but this gives great returns. 

What would be the best way to borrow this money? 

THE ANSWER

Development finance is the type of finance used in this - it’s a 'does what it says on the tin' thing - you have a development that you want to finance.

Development finance lenders are not going to be the major banks, or household names. It used to be but the major banks quit this type of lending in the 2008/09 credit crunch and have never got back in, in any meaningful...

We’ve been experiencing a sellers’ market for a while in the property market, but it’s about to tip the other way.

I’ve been in property for 40 years now and I’ve seen it switch many times, the vibrant sellers’ market that was in place before the first lockdown ratcheted up as the government introduced a stamp duty holiday and people forced to work at home started looking for a property that offered a better home-working space.  Landlords were outbid as prices soared, but then the high rate of inflation has kicked in and that’s pushed the ‘reverse’ button.

Now sites like Zoopla are reporting a significant drop in searches and estate agents are actively chasing new business instead of sitting behind their desks desperately trying to keep up with the demand for new homes.

The question is not ‘will it become a buyer’s market?’, but how extreme will it become?

The Challenge

For buy-to-let landlords the...

THE QUESTION

We’re new to investing. We have 5 BTL but they’ve all been bought locally at market value.  We have had these properties for nearly a year. 

Our plan is to start flipping properties and we have a pot of £115k to invest. However, properties in our area are really expensive. I’ve explored auction, but we’re not ready for this yet. We will be using bridging finance.

My question is;

•  How do we even compete against other investors that have millions??
•  Are we running before we can walk?
•  And can anyone recommend any advice? What areas are best? 

The plan is to flip to build more equity and then our aim is flip one a year and buy one BTL a year.

THE ANSWER

‘How do we even compete against other investors that have millions?’ Your perception here is misplaced, there are certainly people who have millions in the property game, but you won’t be completing with them. Why? Simple, they have much bigger...

One of the questions I get asked often is which is the ‘best’ strategy for a property investor.  That depends on what your definition of ‘best’ is.  Do you want a quick profit, a long-term income, challenging projects, a hands-off business – or something else?

Probably the most popular investment strategies are buy-to-let and buy to sell (flips).  

•  Buying-to-sell (BTS) gives you a significant cash lump sum (if you do it right) within months.
•  Buy-to-Let (BTL) gives you a much smaller monthly profit (if you do it right) for years to come, with the bonus of potential capital growth (depending on where you buy).

Some people focus on BTS because their current circumstances mean they are not mortgageable. That prevents them using the BTL strategy, until they’ve built up their profits and established a sufficient credit record; at this point they become a more attractive risk to lenders.

Some people choose to BTS properties...

THE QUESTION

We have agreed a purchase price for a lease option at £295k.  We have had the lease for two years and have one year left.

The property is now worth estimated £400-450k and we are looking to finance at this price.

Option 1. Try to find a lender who will go straight to mortgage at higher valuation 

Option 2. Find bridge to let lender who will provide bridge at £295k and move to mortgage at higher valuation

Option 3. Are there other options?

THE ANSWER

Number 1 is not an option because your relationship with the current owner breaches mortgage lenders’ requirement for any purchase to be an arm’s length transaction i.e. there is no pre-existing relationship between buyer and seller.  The option agreement is evidence of a pre-existing relationship.

Number 2 will be a struggle because bridge-to-let lenders (not that there are many) are predominately mortgage lenders who dabble in bridging. There will be a reluctance here to lend...

There was a time when no deposit mortgages were available, but the credit crunch put paid to all that.  However, people still ask if they can purchase property without a deposit. In reality it is still possible to get 100% finance by using the house you’re buying and your unencumbered main residence or existing rental property as security to get the deposit money and refurb costs from the bridging?

I teach exactly how to do this under the Fast Funding Formula module in my Ninja Investor Programme workshops and, in essence, this is how it works.

If you own 100% of the equity in a property you can offer it as additional security to enable you to borrow 100% of the purchase price of the property you want to buy.  More than that, you can also borrow the refurb costs too.

Bridgers will lend you up to 75% of the value of your unencumbered property.

Not everyone owns a property with no mortgage on though, do they? The good news is that it is also possible when your current...

THE QUESTION

Currently I have a BTL via a limited company, with a value of £124k.  There is £53k outstanding on a repayment mortgage with 12 years remaining.  My current interest deal expires in about three months’ time.

I have no spare cash in bank, the rent literally comes in and pays the bills and what's left pays the annual tax return.

The property has long-term, decent tenants who have  been in residence for three years and plan on staying, although this is not a problem as, if they decide to leave, it will rent easily 

I want another BTL with a value of around £100k and plan to use the equity from the current property to raise the deposit, fees, SD etc (max £30k).  Then to repeat this until I have 5 BTL properties.

Do I switch my current BTL mortgage to interest only and also the new mortgage on interest only?

Or the new mortgage on repayment? 

Or switch the current BTL mortgage to interest only for 12 months, get...

When you’re investing in a leasehold property the number of years remaining on the lease is an issue for a number of reasons.

Mortgage lenders like to have a comfort zone of years left on the lease – usually somewhere between 30-55 years – on top of the mortgage period.  As most people take out a 25 year mortgage, that means that 80 years plus on the lease may well keep your lender reasonably happy.

However, it is worth noting that some mortgage lenders will decline to lend once the lease ticks down below 85 years. As each year of the remining lease lessens, the choice of lenders diminishes still further. Once you get below 55 years – you’ll need to purchase by some other means (i.e. cash or bridging finance) as getting a mortgage will be nigh-on impossible.

What are your options with leaseholds below 80 years?

Avoid them like the plague!

OR see them as a profitable opportunity.

The challenge for owners of short leasehold properties is that their...

THE QUESTION

I plan to purchase four BTL properties over the next 12-18 months, with a value circa £200,000 each, all on 75% mortgages through my limited company.

Rental income for each will only be around £850 per month, less interest payments and maintenance cost net £500 - £600 max.  I intend to leave the rental income in the company as taking it would push me into an unreasonable tax bracket. 

Property prices in the area I live have doubled within the last 10 years, and will probably do the same over the next 10 years, so using that equation purchase price of 4 = £800,000

Potential value after 10 years = £1.6m

Would you work it differently?

THE ANSWER

Rental income of £850 on a £150k mortgage just about scrapes the required rent to borrow 75%, so it ticks that box.

If you just want 'minimal effort, sit back and let it happen' type of investing and four properties satisfies your landlord portfolio needs, then buying four...