Finance for Property Refurb

[matc]

Hi all,

Sorry about another property development post but I have searched and read a few related posts but couldn't find out exactly what I wanted to know.

Anyway, I am very interested in doing some property refurbishments. I have seen a property for sale locally that needs complete refurb for approx £125k I have relatives in the trade who can help me with the refurb so I think I would only need to spend about £8k on materials etc and expect to make about £15k profit reasonably quickly. My question is how can I fund this sort of project, I have a mortgage at the moment and obviously both me and my partner work full time but I don't think we have enough disposable income to cover the cost of two mortgages.

Is what i'm looking at doing unfeasable? I could take some equity out of my current house to cover some of the costs but I'm unsure what is the best route for me to go down. I know some people give up work to do property development full time how do these people pay their mortgage payments/bils etc.?

I know I have rambled a bit, but just hoped someone on here may be able to help??

Thanks in advance,

Mat

[johnfm]

At that sort of level, you need to take some risks - if you and your partner can't support another mortgage for 3-4 months you can't really afford to do it.

I say 3-4 months, as a £10k refurb should not take for than a few weeks - say 8 - from start to finish, less if you really get stuck in and there is littel or no structural work to do.

if you are confident you can do it, get a self cert mortgage - you will probably only get a 90% LTV, so you will need to find £12.5k deposit, legal fees and the refurb costs - so you will need £20k or so of either your own cash or some equity to use as security.

Good luck.

[matc]

Thanks John,

Well we could afford it but it would mean a bit of a change of lifestyle, but if the rewards are there then it might be a good move. I am considering changing my mortgage to an interest only as it is due for renewal in a month so this would make things a lot easier in the short term.

This is something I really fancy doing just don't want to make any major financial mistakes when I start. We are in a pretty good position with our current property so I don't want to mess things up!!

[Egbert Nobacon]

Don't forget - you will only get your projected profit if it sells reasonably quickly.

Some important questions to ponder :

Are you paying over the odds to purchase it ? - get this bit wrong and it could sink the chance of any profit before you start

What is the worst case scenario with regard to sale price ? Do your research -don't rely on what Estate Agents tell you. Independantly ascertain what other properties have actually sold for - not what they were put up for.

Have you budgeted for the higher spec people expect in a refurbished property these days ?

Will the profit be taxable ? If so how much will you really be left with ?

If you couldn't sell for whatever reason, would rental income cover your mortgage outgoings or could you subsidise indefinately from your own income?

I am not trying to put you off, but it is hard to make a real return on simple refurbs these days especially at the lower end of the market, unless you are building value in by adding to the property in some way.

If you can see a real return - go for it - but just ensure you have taken into account all your likely costs/ scenarios

Good luck

[Deva Link]

It strikes me that £15K is nothing like enough.

So many things could go wrong - the work costing more than expected (relatives suddenly busy when you need them etc), extra work being required, the house not selling at the end of it, etc etc. If you could see a potential £50K then maybe, but £15K doesn't even seem in the right ball-park.