BTL lenders have a very 'vanilla' approach to what they want to lend on, based on their view of the worst case scenario i.e. how easily could the property be disposed of if it was repossessed?  They look for properties with broad market appeal.  If it’s not a regular freehold house let on a single AST, they start to put up the barriers.

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 into flats

If you’re requesting a mortgage for any of these they prefer to play safe and decline to lend.  So when you are planning to buy a building that has been converted into flats you have to jump through some hoops. 

The first – and critical step – is to establish whether the property is a legal conversion. In other words, does planning permission exist with the local council for it to be separate flats rather...

The phrase ‘a bridge too far’ has always been used to describe something that is unrealistic or unreasonable.  Bridging finance has often fallen into that category by uneducated investors.  In most people’s minds bridging is ‘******* expensive!’

This still largely true if you’re using it for its original purpose, buying a new main residence before selling your current one but that is a small percentage of the bridging market. Commercial use is the main way bridging is now used i.e. to make money on properties you don’t actually live in. 

More than a decade ago, bridging interest rates were approx. three times higher than mortgage rates.  Back before 2010, the standard rate for bridging finance was 1.5% a month – i.e. 18% pa, At that time mortgages were running at around 5-6% annually.

The credit crunch caused mortgage interest rates to drop, and they’ve stayed low for more than a decade, sitting at around...

This is a case study with two different investors with £100K to invest:

Amy decided to use her £100K to buy a property cash, refurb it and refinance it. 

George was looking to invest his £100K in four buy-to-lets (BTLs) in good areas and in good condition. 

Amy was really lucky, she got a property below market value, the refurbishment went well, there were minor additional costs as the team uncovered problems when they lifted up the floor but, overall, upon refinance Amy had a deal that generated a healthy return. 

She left only £23K in the property meaning she got all of her money back apart from £23K. 

George however went for a different strategy, he purchased four turnkey BTLs in areas that provided good capital appreciation and rental demand. George's properties were located in two of the best cities for growth predicted by Savills. George only spent a total of £98K as he's purchasing on a mortgage and not spending anything...

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...

If you’ve been building your property portfolio and have an eye on doing a new build project, you need to know the ropes to ensure you finance it properly and make a good profit.

These are my top tips:

Development finance is different

It’s different to most other property finance options and you need to understand how it works.  This kind of finance is no longer available from the banks, who pulled out of it during the 2008 credit crunch.  Most development finance lenders are small specialist lenders who usually only offer this kind of finance.

There are barriers to entry to deter people who are dabbling and ensure only serious investors qualify.

You’ll need experience

This is that Catch-22 situation.  You need experience, but you can’t get experience without the funding to support you.  The lender will expect you to have relevant experience – in other words the same level of development.  For a single or double unit project,...

People get into property for a number of reasons.  They may be looking to build a nest egg for their retirement, they may have a passion for property, they may just hate their day job and are looking for a way out.

If you have main employment and your property career is a part-time - evenings and weekends - activity, it can be tempting to see how quickly you can build your property portfolio to generate enough to live on.  However, before you get excited about being a full-time property investor, take a step back and consider the additional challenges you’ll face.

Being able to throw off the shackles of an unrewarding and unfulfilling job may be right up at the top of your life goals list, and rightly there is a huge sense of achievement in bringing about such, but what if that means your portfolio expanding ambitions may have just ground to a halt?  Having no other means of income can have an adverse effect on your ability to raise mortgages. Why? The last...

THE QUESTION

I'm looking for a little guidance on financing an auction property.

My brother and I have construction management experience and are looking at a house coming up for auction shortly.  We have roughly £50K to use as a deposit and to get any renovation works started.

We're considering a house with a guide price of £280K and would pay up to £300K for it.  We estimate that it would need £100k of work to bring it up to scratch, including a large extension, and would be worth well north of £500K once complete.

I have spoken to a broker I found online who have offered 65% LTV, which leaves us a fair bit short of being able to purchase and complete the project.

Are there other financing options that won't completely destroy the margin? I've considered Mezz, but rates of 20% aren't particularly attractive!

Second charge lending has also cropped up before so am interested to learn more about it. I do not have property in the UK, but my...

Property prices at auctions are going crazy!  The bidding is pushing prices way above their market value - not just by a couple of thousand, but by tens of thousands.

Here are a couple of examples I’ve recently come across.

A property was put up for auction that was located in a street where the best price for any of the other properties had been £230K.  The property being auctioned wasn’t in good condition and it was estimated that it would need about £45-50K to bring it up to its full value.  The winning bid was £220K - before stamp duty, legal costs and auctioneer’s fees.

Crazy! – that buyer is going to be nursing a serious loss when they get around to doing the necessary modernisation. 

Another property in a street of small 2-bed terraced properties was up for auction and the best price any of the similar properties had made in the recent past was £120K.  It definitely needed a facelift, which would...

THE QUESTION

If an asset holding company that owns a portfolio of BTL properties wants to mortgage one (unencumbered) in order to loan those funds to another company (a child of that company) for the purpose of buying a commercial building in cash (i.e. office and warehouse) is this feasible or would lenders take issue with it?  Technically it's a vacant commercial unit.

This needs doing quickly as the deal is live right now.

THE ANSWER

It would be wise the check out with your accountant on the tax implications of your idea.  From a lending point of view, lenders have no issue with you raising money for a deposit from the equity of other properties you own, this is done frequently without problem. 

Where you will hit a problem is that you want this done quickly/immediately, it won’t be. It will take longer than that for the reason that mortgage lenders for the BTL mortgage are slower at processing mortgages than before Covid, for a variety of reasons but it...

When a deal falls through and someone else ‘buys’ the property, what do you do?

Properties are selling fast, the market is buoyant and the competition between buyers is hot.  It’s not just investor v. investor, you’re up against anyone who is looking for their next home too.  So, you’ve made an offer and the answer is ‘Sorry, someone else has made a better offer and it’s been accepted.’  Now what?

Most people write that one off and go on to their next deal.  But what if you haven’t actually missed out on the deal?

Did you know that one in every three deals fall through?

The sale is not complete until contracts are exchanged and that can take weeks - usually months.  As the saying goes ‘There’s many a slip between cup and lip’ and in property that is very true.

People don’t complete the deal for lots of reasons - they may have a change in personal circumstances, find another...