Redundancy looming - releasing equity in property to purchase a doer upper?

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    Redundancy looming - releasing equity in property to purchase a doer upper?

    Hi,

    I have been slowly dabbling in property for the last 15 years alongside a full time job. I have refurbished a lot of houses and then moved up the ladder. Along the way I have kept two of these properties and paid off the mortgage. So I have 2 properties, mortgage free that I rent out. Unfortunately my job is now at risk of redundancy. I am thinking about getting into property full time if I get made redundant and doing them up and selling on quickly. However, I am not sure how I can finance a house purchase with the equity in the houses that I rent out. Is it possible? I have one house worth 150k and another worth 80k – could I easily release the equity on these to enable a new purchase? What sort of mortgage would I get on these? A buy to let mortgage?

    I currently live in a house with a mortgage which my redundancy will cover along with living expenses for hopefully a year.

    Thanks

    #2
    I understand the predicament that you potentially face and the actions which you might exercise should you find yourself redundant.

    Being a Broker my initial advice is to take steps to repay your current mortgage on your primary residence , it is important that you provide a safe environment for your family , assuming that you are indeed either in a relationship or married, the worries are then eliminated in meeting mortgage payments.

    Effecting one or both BtL properties for remortgages should be relatively straight forward , the lender will normally require your proof of income along with corresponding tax returns, Tax Computations along with Bank Statements But May not seek an employers reference thereby avoiding legitimately the dreaded question of is your position of a permanent nature, the same does not normally exist for regulated loans.

    Once you have dealt with the repayment of your primary residence you can then hopefully have sufficient monies to use towards the deposit of a property which is habitable but which would benefit from a refurb project. It is important to note that lenders are wanting to lend long and can take a dim view if long term funding facilities are used but the loans are repaid in a relatively short period. If you seriously want to buy, improve and flip then Bridging loans are the recommended vehicle but the rates can be far higher irrespective of whether you have the interest rolled up or paid monthly.

    Discuss your ideas with a broker who knows the Buy to Let market , don’t try and go solo.

    Best of luck going forward.

    Comment


      #3
      hi mr mytwoburgers

      your idea will work, if you mortgage your 2 renters youll have a fighting fund of around £180k, assuming you do them on interest only mortgages theyll cost you about £400 pcm, id like to think youre renting them out for more than that

      just remember things like stamp duty youre gonna pay an extra 3% on anything you buy, council tax while youre doing it up

      ive got 5 renters and concentrating on doing flips now, its a great way to make a living

      Comment


        #4
        Brooke, the first tenet is safety before speculation. What will the situation be in 12months if the market were to be corrected , any Property acquired failed to sell and on the home front line the Mortgage needs to be paid and there are no funds available.
        i fully appreciate your rationale but not when your full time employment is at risk. As a broker my Compliance team would hang me out to dry if I advocated such a proposition , indeed the FCA might indeed have something to say and question my legitimacy to proffer financial advice.

        Comment


          #5
          good morning mr ranger

          wise words as usual, and i can totally understand that professional advice is to play as safe as possible, and quite rightly so.

          my reply was purely my opinion based on the information given in the OP, Id still stand by my opinion if mr mytwoburgers home mortgage is not a concern to him because of things such as the size of it, his confidence in his ability to make a profit on flipping houses, his likelihood of gaining alternative employment, without this information its hard to call. i have a mortgage on my home but have no intention of paying off, i can put the cash to much better use and i also have contingency plans if my initial ventures dont prosper. However should mr mytwoburgers mortgage be relatively large and he would have concerns about meeting it then i would agree that thats more likely to be his best option particularly if he has a decent amount of equity in it.

          id hazard a guess that the rent from his 2 owned properties would pay interest on 2 btl mortgages and his home mortgage, that would then give him the capital to go out and earn a living with his home very secure, or at least more secure than the majority of people that become redundant who arent fortunate enough to have another source of income. My reasoning for this is its what ive just done and it was successful, it was a joint venture with a mate, we bought a house cash for £40k, spent £20k on materials and fees and sold it for £85k giving us both an income of £12.5k for 3 months work. I could of used the £30k i invested to pay my home mortgage off, however it only costs me £300 pcm most of with is the repayment element, i believe using my capital to earn a living to be the prudent course of action.

          that being said i do tend to err on the safe side when giving advice, i have people who ask me how to get involved in property developing, the first thing i ask them is "are you prepared to make a loss?" it tends to get people thinking as im sure people do when your advice is that the best thing they can do is make sure they dont lose their home

          perhaps mr mytwoburgers will return and share a bit more info

          regards

          broose

          Comment


            #6
            i can understand your rationale and the success you have clearly achieved , unfortunately when arranging finance and accepting that Btl is classified as unregulated I treat all mortgage applications as if they are indeed regulated and to avoid any future accusations of mis-selling I am obliged to err on the safety first angle particularly if the client really doesn't expect to source similar employment to that which he was made redundant .

            I was slightly amused by your question "Are you prepared to make a loss" for many entering the Investment property sector they have been seduced by the purveyors of " Become a millionaire very quickly by investing in property" without realising that there are indeed failures as there are successes in such activities. I like to sleep at night knowing that i have discussed all aspects of what the client is seeking to achieve and indeed incorporate that into a Suitability Letter when making a product recommendation.

            Comment


              #7
              people dont want to hear the bad stuff, they want to hear what you just quoted "Become a millionaire very quickly by investing in property", its always people i know that assume that you cant fail in property and want me to almost gaurantee how much theyll make however i know how itll go if they take the plunge and are either unlucky or incompetent neither of which i can control, theyll be pointing the finger at me, so i always advise to the best of my knowledge on what to do and how to do it but throw into the discussions numerous times that theres no guarantees and theres a possibilty of making a loss

              funnily enough the last of my rental properties i completed was actually bought with the intention of selling to generate capital, all houses in the street are identical, mine had a major refurb, rewire heating etc etc, previous 3 houses sold in the street were an average of £95k, put mine on the market for £95k and couldnt get an offer, not a major problem as at that value im quite happy to put a btl mortgage on them and rent them out to get my cash back out albeit only 75% of the value i wanted to sell for which was what the surveyor was happy to value it at for the mortgage company

              so yes theres an example of why your policy of safety first is a good idea as sometimes property defies logic and just doesnt pan out as it should do

              Comment

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