Property Developing
Discussion
Jasandjules said:
Would an interest only mortgage be given for a 100% value on an auction property?
...and if you are looking for 100% interest only on an auction property you are heading for a hiding. For a start you will have to pay a substantial deposit on the day of auction and you mortgage approval may not even be through when you are doing that!100% finance is possible but it depends on the type of development. If it's a simple refurbishment then many Buy to Let lenders will look at it but they will probably go by purchase price rather than market value. You can take out a bridging loan on the property at the market value and then re-finance this onto a Buy to Let mortgage, effectively giving you 100% so long as the figures stack up. Otherwise, you can get 100% from some of the development/mezzanine lenders but they may ask for a profit share. If you want to know more then email me as I work for a broker that specialises in this area.
Dick Dastardly said:
100% finance is possible but it depends on the type of development. If it's a simple refurbishment then many Buy to Let lenders will look at it but they will probably go by purchase price rather than market value. You can take out a bridging loan on the property at the market value and then re-finance this onto a Buy to Let mortgage, effectively giving you 100% so long as the figures stack up. Otherwise, you can get 100% from some of the development/mezzanine lenders but they may ask for a profit share. If you want to know more then email me as I work for a broker that specialises in this area.
There is alays money out here to make but it will be harder now than it was before 1) because all the cheap ones have already gone 2) every man & his dog fancy a bit of he cake and the auction prices are reallyu inflated down in the S.E. at least to the extent that most refurb jobs just dont have any profit in them.One thing you could do is buy land which at some point in the future could become developed - and all you would need to do is sit on it land will not lose value and even when it comes to building the place just sell it with the planning permission that way you totally avoid any unseen problems & as your new to the game your total lack of manageing a build would not be an issue. Also do the sums risk v reward sell the land the profits yours build a house huge debts until the place is sold which could be a long time.
Jasandjules said:
Plotloss said:
I've got to say, I think you're a bit late to this particular party...
Indeed, I am sort of thinking about planning it all out in the event the housing market takes a dive...
shadowninja said:
Jasandjules said:
Plotloss said:
I've got to say, I think you're a bit late to this particular party...
Indeed, I am sort of thinking about planning it all out in the event the housing market takes a dive...The practical scenario is that the first thing to be flogged will be the buy to lets which are most likely nearly new and/or empty.
The second factor is that it will probably be the reason why the market has taken a dive BECAUSE mortgage companies are not allowing high ratio or high risk mortgages. The first thing they will do to cover their risk is to not allow any of these.
A friend of mine who had a deposit down for 4 flats a couple of weeks ago with a confirmed offer for a mortgage recinded. He had a 15% deposit down, but now the bank were looking for 25% minimum deposit so he backed out.
shadowninja said:
In that case, forget the developing as they'll probably already be developed (complete with laminate flooring, brushed metal knobs, aluminium kitchen etc) when the owner remortgaged for some home improvement.
That is a fair point, BUT I was thinking of those repo's wherein the ex-owner removes everything including the kitchen sink prior to eviction....Purchasing a spot of land also appeals, but I know the hassle and likelihood of finding one !!
Jasandjules said:
shadowninja said:
In that case, forget the developing as they'll probably already be developed (complete with laminate flooring, brushed metal knobs, aluminium kitchen etc) when the owner remortgaged for some home improvement.
That is a fair point, BUT I was thinking of those repo's wherein the ex-owner removes everything including the kitchen sink prior to eviction....Purchasing a spot of land also appeals, but I know the hassle and likelihood of finding one !!
rich1231 said:
Jasandjules said:
shadowninja said:
In that case, forget the developing as they'll probably already be developed (complete with laminate flooring, brushed metal knobs, aluminium kitchen etc) when the owner remortgaged for some home improvement.
That is a fair point, BUT I was thinking of those repo's wherein the ex-owner removes everything including the kitchen sink prior to eviction....Purchasing a spot of land also appeals, but I know the hassle and likelihood of finding one !!
you are 10 years behind the boom my friend, unless you have cash you will struggle to see any kind of worthwhile return.
Property is a great and very secure long term Investment, but the idea of buying dumps for profit has been done to death, especailly with the housing market currently being very slow.
Property is a great and very secure long term Investment, but the idea of buying dumps for profit has been done to death, especailly with the housing market currently being very slow.
blackcab said:
you are 10 years behind the boom my friend, unless you have cash you will struggle to see any kind of worthwhile return.
That is my question though, how much cash would be needed to get in at the one bed flat type of level!?!? 50k? 100k? Basically how much do you need to get started? 
Jasandjules said:
blackcab said:
you are 10 years behind the boom my friend, unless you have cash you will struggle to see any kind of worthwhile return.
That is my question though, how much cash would be needed to get in at the one bed flat type of level!?!? 50k? 100k? Basically how much do you need to get started? A BTL mortgage will usually go up to 85% LTV, so you need at least another 5% of the purchase price in cash. You have 28 days to complete the sale, or forfeit your 10%.
You also need to fund Stamp duty, legal costs and the costs of setting up the mortgage (not inconsiderable on BTL type mortgages)
There are BTL lenders who will go above 85% , but as with all BTL, the rental calculations have to fit. If they don't no loan.
Auction properties tend to be shabby and in need of work, so they tend not to value well. This is going to be really stressful whilst you wait for a surveyors report. If you are thinking of buying at auction, you need to get a friendly valuer (do you know one) to walkyou round the property and tell you what you are looking at expense wise, and indeed in terms of return
There are mortgages that will allow for "light refurbishment" projects, i.e new kitchens, bathrooms, rewires etc. Some of these will also allow you to remortgage once the property is finished to release capital, and start all over again. However you are tied in on them, so if you are going to do up and flip, you will have a large chunk of your profit removed in early repayment charges.
You need to do a shitload of homework on the area you are thinking about "investing" in before you even consider getting involved.
Jasandjules said:
blackcab said:
you are 10 years behind the boom my friend, unless you have cash you will struggle to see any kind of worthwhile return.
That is my question though, how much cash would be needed to get in at the one bed flat type of level!?!? 50k? 100k? Basically how much do you need to get started? It all totally depends on where you will be doing your development, how much work needs doing, if it requires structural work or purely cosmetic. I live in South Manchester and have done a couple of renovations but I started with a 2 bed mid terrace cottage which needed all together about £110k investment. Having said that I know people who bought houses around Lancashire for £30k ish, spent less than £10k on them and sold them on for £55k-£60k. The important thing to remember is be honest with yourself with regard to your costings. Remember to factor in things like the estate agency fees, contact a lawyer and get figures on your legal bills; don't guess, don't forget the all important HIP as well these days, that could be up to £800, and factor in at least 6 months worth of mortgage payments as a worst case scenario. There is no point you personally subsidising the development by paying the mortgage out of your own pocket as you could technically end up loseing money. Other than that mate good luck and have fun!
for what it's worth, (and i'm not trying to be nasty) your initial question means you've not done nearly enough research into the subject as yet.
the answer at the moment is no, and realistically if it was ever yes then there'd be another credit crisis.
as a property developer you need to be(or have access to) experts in the following fields
building
finance
negotiations (both with buyers/sellers and with suppliers and subbies)
accounting
man management
project management
quantity surveyor
you need a good credit record to be able to borrow
(typically 70% ltv)
a contingency for when things go wrong (and they will)
in the current market you'll be up against literally hundreds of other would be developers for ever plot you look at (the best ones go word of mouth)
the answer at the moment is no, and realistically if it was ever yes then there'd be another credit crisis.
as a property developer you need to be(or have access to) experts in the following fields
building
finance
negotiations (both with buyers/sellers and with suppliers and subbies)
accounting
man management
project management
quantity surveyor
you need a good credit record to be able to borrow
(typically 70% ltv)
a contingency for when things go wrong (and they will)
in the current market you'll be up against literally hundreds of other would be developers for ever plot you look at (the best ones go word of mouth)
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