If you’re following the Buy - Refurb - Resell or Refinance strategy you are likely to come up against the so-called ‘6-month rule’.  There is some confusion about what exactly this ‘rule is.

In truth there’s no such rule - it’s simply a practice that some lenders have adopted.  The problem it creates is that those lenders will require you to have owned a property for six months before they will consider a remortgage - or, if you’re selling it, will be willing to offer a mortgage to your buyer. 

If you’re doing a refurb with a view to refinancing onto a BTL mortgage then the simple solution is to get bridging finance for the first six months to cover the period of refurb and then refinance.  However, it gets tougher when you’re planning to sell the property quickly.

Does this mean that you can’t sell it?

Not at all.

If you’re selling to investors or landlords, it’s less of a problem as they have access to a range of lenders but the cheapest of them are likely to impose that 6 month...

THE QUESTION

Is it really worth the drama of owning a BTL and having 20% returns over 3 years when the Stock Exchange in my pension is Tax free and has higher returns? 

Or the drama of searching for a property, conveyancing paperwork, Stamp Duty penalty, touch-up renovations, eye balling for a good tenant, regular maintenance, annual HMRC tax returns, the risk of rent arrears, re-mortgaging paperwork, Capital Gains Tax, the risk of tenants trashing up the place, dealing with lazy Estate Agents, dealing with calls from Estate Agent to approve repairs etc.

THE ANSWER

The obvious points you are missing is leverage and to a lesser extent downside risk, put simply –

•  If you invest £100,000 in shares and you get a 20% increase - now your investment is worth £120,000.
•  If you invest £100,000 in a property as a 25% deposit, a 75% mortgage allows you to borrow £300,000 enabling you to buy a £400,000 property. A 20% increase in a £400k property is £80,000 - now your original £100,000 inv
...

Property can be a lonely road to travel, unless you happen to work with a partner.  You’re investing big chunks of money and like any solo business, it’s easy to lose your ability to be objective.

Everyone is an armchair ‘expert’ and if you mention ‘property’ in any groups of people you’ll get lots of advice, most of it negative.  If you attend property networking groups at least you’re with like-minded people, but to trust other people’s advice you need time to get to know each other and learn about their background and experience.

What do you do when you need advice?

Support is critical - a trusted forum where you know that people don’t have another agenda and are genuinely interested in giving (and getting) support in their property journey.

The kind of support you need changes as you move along your property journey and that’s why I’ve created a number of options for property investors.

There’s a YouTube channel with lots of videos sharing information and expertise to help inv...

THE QUESTION

I am currently living in the Middle East, but have two properties in the UK, both are mortgage-free.  The value of each is approximately £250k and both are rented out to long-term tenants.

⠀⠀⠀⠀⠀⠀⠀⠀⠀

I want to start increasing my BTL portfolio size via the Buy, Refurb, Refinance method. Work will be done and managed by experienced family based in the UK.⠀⠀⠀⠀⠀⠀⠀

Would you:

1. Re-mortgage one of those properties to release equity to fund the next property?⠀⠀⠀⠀⠀⠀⠀⠀
2. Take out a separate BTL mortgage (not linked to those properties) to fund the growth and continue with this method?

THE ANSWER

Because you have family based in the UK, the Cross Collateral bridging option mentioned becomes a possibility.

The choice of leveraging the equity in your current property is a choice between 

1. Mortgage at a lower rate, but with continual expense 

and 

1. Bridging at a higher rate, but for a shorter period.

If you feel that you are continually going to be having the money r...

Here we are at the start of another year; did you achieve what you wanted to last year?

My review of 2021 from a property investor’s perspective is here.

If you didn’t do what you set out to do have you reviewed what didn’t work, what did you miss doing, were there things that you couldn’t do or didn’t do?  The seeds of the future are usually in the past, so it’s worth reviewing what did and didn’t work - and what changed your original plans.

I’m not suggesting that your plans shouldn’t have changed, after all, plans made in January 2020 were pretty much blown out of the water - or had to be radically revised - due to unforeseen circumstances.  Things change and plans should not be set in stone, but not having plans means that often nothing gets done.

So here are my top 5 questions to ask yourself as you’re putting your plans in place for 2022:

What was in your plan, but didn’t get done?  And why?

Examining what you didn’t do, is almost more important than looking at what you did...

THE QUESTION
Do all lenders require a personal guarantee (PG) for a 70% LTV bringing loan? If so, is there any way to do a bridging loan without a PG (i.e. by reducing the LTV to less than 50% for example?)
THE ANSWER
Pretty much any lender lending to a limited company, rather than a person, wants a PG. This protects the lender from the shareholders winding up the limited company overnight (as they can well do) and risking any potential losses not being made good.
Borrow in your personal name and PGs are not required because the lender can just come after you for any shortfall. They cannot do this if the entity that borrowed the money doesn’t exist any longer. A PG just means that you are the lender’s failsafe if the company can’t or won’t pay up - no more, no less.
Any kind of business loan, including mortgages, lent to limited companies have PGs at their core, but mortgages are massively less risky for a bank to lend on.
Banks rarely lend more than 75% of the value of a rental property, to...

Rent-to-Rent is a great way to get into property without having a big lump of cash to invest.  But it is time-consuming as you’re operating as the landlord, with all the responsibilities for maintenance, finding and monitoring tenants, etc. - you have to work hard to make a profit.

Given that most rent-to-rent properties belong to owners who simply can’t be bothered to look after them, they’re often open to selling if it’s worth their while.

If your rent-to-rent is coming to the end of your contract and you think the landlord may be interested if you make an offer, but you haven’t got a big enough deposit yet, does that mean you have to just carry on with rent-to-rent until you’ve built up your nest-egg?

Not necessarily!

Breaking the barriers

The first barrier is finding a lender willing to give you a mortgage to buy the property.

The second barrier is finding a way around the deposit challenge if you don’t have enough to put 25% down. 

A rent-to-rent contract with the current o...

THE QUESTION

Could I get a normal BTL mortgage on a property and use it as a holiday let or is that super naughty?!!

THE ANSWER

If you read the T&Cs that pretty much all standard BTL lenders issue, you’ll find these conditions within them 

1. The minimum rental term permitted is 6 months

2. The maximum rental term permitted is 12 months

3. The only permitted rental contract is an Assured Shorthold Tenancy (AST)

Doing as you propose breaches 1 & 3.

The lender may not catch you doing this, but if/when they do, you have given them grounds to call in the mortgage.  You will receive a Cease & Desist letter ordering you to revert to AST renting or face repossession if you don’t.  This will be investigated to ensure you have complied.

As Clint Eastwood memorably said "so, do you feel lucky?"

You may conclude it is a safer bet to get a mortgage without the above conditions and there are a few lenders who specialise in this kind of mortgage.  What you need is a good broker who know...

THE QUESTION

With 10 years in the BTL business I’ve a number of properties bought jointly with my wife.  I now want to get into flipping properties (buying, renovating and selling for profit).  Here are my questions:

1. Is flipping still a good strategy in these times?
2. Is it beneficial to start this under a new company?
3. Most importantly where can I source such run down properties from? Any online source? Any specific agencies?
4. Do we normally get mortgages on such properties?
5. Any specific areas of the country that should be targeted?

THE ANSWER

That's a fair list of questions; let’s have a crack at them -

1. Flipping in a rising market is a much easier than in a falling market - it’s a bit like swimming up or down stream. Your challenge if you decide to flip is which will it be when you come to market your property for sale, rising of falling? Since the end of lockdown 1 in June 2020, the market in most areas has definitively been rising. The end of the stamp duty holiday ...