THE QUESTION

What is the best way of purchasing an auction property and then refinancing it after the refurb work has been done?

The guide price is 200k, but this property has the potential to become eight self-contained units generating £400 pm cash flow each after a bit of work (£15-25k).  I have about 25k for deposit and a partner who would potentially put in the same, but was wondering the best way to go about doing this.

Could I use a commercial mortgage for the refinance?

THE ANSWER

I have financed plenty of these types of deal, this may help you:

1. Auction purchases are realistically funded with cash or bridging finance due to the restricted timeframe the auctioneer’s terms give you to complete the purchase, usually 28 days. Trying to complete with a mortgage, particularly a commercial mortgage, will end in only one way; you’ll lose your 10% deposit for failing to complete in time
2. For the refinance, commercial lenders lend to experienced landlords...

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 pretty new to this, I have found a few BMV properties, one is a 3-bed semi property that will sell for maybe £65k, needs a full refurb, market value on the street is approximately £145k.  I don’t have much in the way of funds to put into this, what would the best option be?

THE ANSWER

The generic answer to your question would be delayed completion bridging, as long as the house was vacant.  This enables you to borrow against the £145k post refurb value, not the £65k purchase price to complete the purchase,

Here's how it works:

1. Negotiate with the vendor to exchange contracts quickly, so they are reassured that it is sold.
2. That negotiation should include getting the keys on exchange, not on completion as is normal, so you get access to the property.
3. That negotiation must also include delaying the completion until the refurb is complete.
4. Get agreement to lend from a bridger that will lend on the post refurb price, whilst...

THE QUESTION

I own two properties outright – both have tenants and yield 9.5% of their £85K (each) value. I've owned them for four months they have been let for two months. I have no proof of income as I've just started doing this full time. Can I BTL remortgage these at a competitive rate anywhere, or do I need to wait six months and go through TMW?

THE ANSWER

The wider issue here is that you can buy properties for cash, with all the advantages that brings, but you don’t want to then wait six months plus before you can repeat the process. If the mortgage lenders that give you the best rates require that you own the properties for six months before you can apply for a mortgage, you are missing out on potentially lucrative deals because your cash is trapped in these properties.

You have a defined chunk of cash and it is big enough to buy properties outright, as you have bought two worth £85k each (I’m not sure if you paid £85k or if, now you have...

THE QUESTION

I have seen a great property I want to buy but I cannot decide if I should buy it for cash then refinance it once it is refurbed, or borrow to purchase it. I have the cash to buy outright, but I am worried that, by tying up all my cash in a property I will not be able to buy another property during the period I am waiting to remortgage it, if I found a really good one.

THE ANSWER

If you can fund a deal with cash, you should; that way you have zero borrowing costs.

Investors are often reluctant to do this on the basis that tying up their cash in one deal takes them out of the game if and when other juicy deals come along whilst they are waiting to remortgage to release their cash.

This is impaired thinking. I teach that, whilst you are in that limbo period, you can buy your next deal without any hard cash at all -- by intelligently using bridging finance, like this

1. A bridger will lend 70% on the next property (let's call it B) you want to buy
2. They will also lend up to...

THE QUESTION

I have a BTL property owned for 3 months which has 2 years ERC on it so I don't want to remortgage, but can I use the property as a security to buy another refurb property.  The property was originally purchased on a 75% LTV BTL mortgage, but has been re valued after refurb works and is now at 57% LTV.

Ideally I want to get on with buying and refurbing another property which would be a buy to sell; I have the finances for the refurb, but not the deposit. The properties I am looking at are low value ballpark PP 65-70k and the deposit I am looking for would keep the security property around 70%-75% LTV.

THE ANSWER

If you want a bridger to lend on a second charge basis they will go to 65%, less costs. So the most you will get is 8% less costs.  Based on your figures, you won’t be able to release enough for the deposit.

However, there is another way to structure this. Use part of the money for the refurb for your deposit instead and then use a bridger...

THE QUESTION

I am considering the use of a bridging loan and would like to know:

• What are the typical fees?
• Over what time period can you get a loan?
• How quick is the approval process?
• Who provides the most competitive rates and lowest fees?

THE ANSWER

There are a number of bridging lenders and the criteria vary from lender to lender depending on your particular circumstances and the questions you ask.  It is a bit like asking:

• How much does a car cost?
• What is the size of the engine?
• How fuel efficient is it?
  ... and so on

Of course, the answers will depend on what model of car you buy. So the answer to your bridging finance questions depend on the property you want to buy, what you intend to do with it and your current situation.  There are a few basic facts that will give you a ballpark view:

• Almost every bridger charges a set-up fee, often 2%, but not always.
• Monthly fees vary for a host of different reasons - location, property...

THE QUESTION

Does bridging lend enough to cover the purchase price and the refurb cost? If not then surely you would have to put money in. Or would you have to buy BMV and borrow % of the market value instead of purchase price?

THE ANSWER

Most bridgers lend 70% of the purchase price, but a handful lend 70% of value. This is great if you are buying BMV, as you can use the discount towards your deposit, but to buy NMD you would need a discount of 30% +.

You would still need to pay for the refurb although some bridgers will lend you money to cover that too, but it is in staged payments in arrears, so you would still need some cash. It may be possible for you to borrow the reduced amount of cash you need privately and bridge the rest.

For example: I brokered a deal last year where the asking price was £350k, a £250k offer was accepted, which meant the bridger lent 95% of purchase price. The refurb cost was £50k, the borrower spent £25k of their own cash then...

I often get opportunities offered like this:

I’ve got an Incredible BMV in West London – for a CASH BUYER ONLY. I’ve just got the valuation done via Home track and, guess what? Its worth £716,000!

The asking price is 495,000 for a quick sale and I could get it down to 450k, as it’s a very motivated seller who needs to sell asap. Do let me know immediately if interested.

This is from a property investor who – clearly – doesn’t actually have enough money in the bank to buy the property himself.

However, he is ignoring one very important fact … this property can be bought using bridging finance, possibly with a very small cash input, subject to a bit of due diligence:

On what do you base your value of £716,000?
Is it on the market with an agent and that is the asking price? Or is it just that Hometrack says that is what it is worth; would that be supported by a RICS survey report?

Assuming its...