THE QUESTION

With an inherited BTL I’m about to purchase another property.  This is a two-bedroom maisonette with 53 years remaining – but with only 53 years on the lease.  I know this needs to be extended to make the property viable for a BTL and have researched the process – so I know what to do and how to do it, but how difficult is it in reality?

THE ANSWER

It is not hard to extend a lease; you just enter negotiations with the freeholder and agree a price.  The cost is progressively greater the fewer years left on the lease.

Negotiations to extend a lease can begin when the remaining term drops below 80 years. You would be very well advised not to negotiate on your own behalf, but engage a solicitor or other suitably qualified person highly conversant with leasehold law to negotiate on your behalf. Choose a solicitor that specialises in leasehold law.

Clearly you cannot agree a price to pay for this flat until you have clarity on how much it will...

THE QUESTION

If I have unencumbered property, i.e. no mortgages, what creative finance schemes/packages are available for short or longer term for development projects? I really want to avoid BTL finance.

THE ANSWER

If you really want to avoid BTL finance and are fortunate enough to have an unencumbered property, you are in a very powerful position.

You can offer that property as additional security/extra collateral for any development project you want to get into.  That could mean that you need to put no actual hard cash into your project; save for survey and legal costs.

Both bridging and development finance lenders would typically lend you 70% (with slight variations) of the value of your property; as well as lending against the property you want to buy.  This is usually sufficient to borrow 100% of the purchase price plus the refurb/conversion/build costs if you need to.

For properties that fall into refurb/minor conversion category, that would generally be bridging....

THE QUESTION

I want to purchase a property for a potential serviced apartment; it also works at 8.5% yield as a Buy-to-Let.

I had a JV partner who was going to put in the deposit with the mortgage in my name.  My mortgage broker has informed me that no lender will accept a deposit unless it is from a family member.  I have not heard this before, is there any way round this?

THE ANSWER

This has been standard lender practice for some time.  BTL lenders prohibit you from borrowing the deposit, their criteria states that deposit must come from your own savings.  You cannot even borrow from family, it must be a gift and the gifting family member must not have any interest in the property.

They insist that you use only your own cash for deposits and they will drill down by requesting bank statements until they are satisfied it is your own money or decline to lend when they discover it is not.

There are several reasons for this stance.  Lenders consider it...

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.

...

THE QUESTION

One of my landlords, whose property I manage for him, has voiced an idea that he wants to sell his 5-bed property – and suggested I might like to buy it.

It cash flows well and we have another 10 doors down.  The demand is strong so it’s a no brainer really; I just need to concentrate on financing.

My question is has anyone already gone through this scenario, and how did you do it?  My thinking especially now is to purchase it as a limited company.

THE ANSWER

To address how to finance this, let’s examine what will and won’t work.

Mainstream BTL lenders, will not lend on a property with 5 unrelated tenants each on a separate AST; most only lend on a single AST, a few will go up to 4 but 5 is outside of their criteria. They also don’t lend to limited companies.

This means that your only option is to use specialist or commercial lenders who, coincidentally, are happy to lend to limited companies.

Expect to borrow 75% with relative...

THE QUESTION

I've had an offer of £87,000 accepted on a property that, once it's had a light refurb, should be valued at £120,000.  Following the mortgage valuation the mortgage company have come back to me and said they are holding a full retention until the kitchen and bathroom have been replaced, but they really aren't that bad.  I've seen much worse and had mortgages for much worse in the past.  How can I get round this?

THE ANSWER

It looks like you have fallen foul of the differing definition of mortgageable that applies to main res or BTL properties. Lots of investors fall for that one too.

Because it has a kitchen and bathroom of sorts, you believe it to be habitable and thus mortgageable and you would be right if it was your main residence you were looking to mortgage.

However, for an investment property that will be let out a different level of habitability is required – it has to be rentable, not just habitable.  In other words, the...

THE QUESTION

I am aiming to buy a freehold BTL property that has three separate flats.   I am unable to find a mortgage provider who will give a mortgage on this type of property.  I was advised that I must have three separate leases in order to get a mortgage.

How can I get a mortgage on this property?

THE ANSWER

It’s no surprise that you are having trouble finding a lender for this; BTL lenders have a very 'vanilla' approach to what they want to lend on.  This is based on their view of the worst case scenario i.e. how easily could they dispose of it if they had to repossess it?  They look for properties with broad market appeal.  Mostly, if it is not a regular freehold house let on a single AST, they start to put up the barriers.

These ‘unmarketable’ properties include:

• Non-standard construction
• Flats above commercial units
• Flats in high rise blocks
• Properties let by the room and many other quirky features
• Houses divided...

THE QUESTION

Do you know any lenders who are willing to lend straight away? I’ve been trying to purchase a second property and they all say I have to wait six months before I can take out a BTL mortgage.

THE ANSWER

If you have bought a property for cash and are now seeking a mortgage to recycle your cash into your next deal, almost every BTL lender will impose a 6 month ownership restriction before they will accept an application for a remortgage.

You may wonder why; it’s because they have an objective which is diametrically opposed to yours.  You want to get your cash out, they want you to keep it in, as they see you taking your cash out as a threat to the security of their money sitting in your property.

If you want access to the full range of BTL mortgages and the low rates that they offer, you have to wait 6 months and there is no other way to achieve access to them.

A very limited number of BTL lenders will accept remortgage applications within the first 6...

THE QUESTION

How can I purchase a property, refurb and refinance to extract most of my money WITHIN 6 months please? I can buy cash if that helps to start with.

THE ANSWER

Almost every BTL lender uses a 6 month ownership restriction specifically designed to stop you from doing what you want to do, as they view it as increasing their security risk. They feel safe when they have your cash, or at least 25% of it, invested in the property.

There are a very limited number of BTL lenders that allow you to apply within 6 months of purchase, but their lending is based on the purchase price.

One or two may allow extra borrowing on the money you can prove you spent on the refurb, rarely on the new market value you have created. So, if you are lucky, you might get a mortgage of 75% of purchase price plus 75% of refurb costs. Hardly getting most of your money out.

If you can buy cash you should do, as you will have zero borrowing costs, until you refinance.  The other advantage of buying...

THE QUESTION

I'm currently looking at purchasing a house for £70k and I have funds to purchase outright with no mortgage. I have a potential tenant ready to rent at £550 pcm returning approximately 9%

My credit rating means I can't place a deposit and get a buy-to-let mortgage, hence buying outright. I’d like to take £60k out of the £70k paid back out for future investments.

Would the banks look at me completely different having a £70k asset or will they still view me as a poor risk and refuse to lend?

THE ANSWER

If I understand you correctly, you have previously been declined for a BTL mortgage because of your poor credit history. If that is correct, owing an unencumbered property will make absolutely no difference to that. Your credit history doesn’t change because you buy a property for cash.

Mortgage lenders turn down people with poor credit histories because that history identifies them as someone who has proved less able to maintain...