Even though it’s a seller’s market there are properties that are available to buy - and sometimes they seem too good to be true.

A typical property is one that looks good from every angle but happens to be situated next to a commercial premises.

The first thing that is on the lender’s mind when reviewing a request for lending is ‘how can we get our money back if the buyer defaults?’  So they’re looking for problems and one of the problems that may raise its head is where the property is located.

If you’re not planning to live in the property yourself, but plan to let it out, you may think that being next door to a pub or a takeaway is a plus, but mortgage lenders don’t see it that way.  What they see are:

• Noisy, probably inebriated, people late at night.
• Lots of car doors slamming at late hours
• Lots of people passing your front door

Lender’s perception of the demand to live with all that going on will be diminished...

THE QUESTION

I am looking for advice on bridging finance (flip, not rent). 

I have cash for one property already, but the gaps between complete, sell and buy next house are proving too long. 

Does it make more sense to do bridging finance for smaller amounts/with cash deposit to allow work continuously (e.g., £150k properties straight after the other) or to mortgage against fully owned property while working on it to allow fewer, but larger, projects?

THE ANSWER

Having brokered hundreds of bridging loans stretching back over a decade and teaching many hundreds of investors how to intelligently and profitably use bridging finance I have plenty of insight on bridging as a finance vehicle.

Having the cash to buy one property gives you a really great start - zero borrowing costs on the first project.  Don’t deviate from that.

You have recognised the limitation that slows you down to a crawl - you have to kick your heels until you can sell the current property...

If you haven’t bought at auction before it’s easy to be misled by the contents of an auction catalogue.  The challenge is that anyone who watches daytime TV and has seen programmes like Homes under the Hammer can be led to believe that every property auction in the country has lots of fantastic deals just waiting to be snapped up.  This isn’t actually the case.

You may see a property listed in the auction catalogue at 20-30% below market value (or even lower in some cases) and a closer look shows it to be in good nick, with no need to refurb.  That looks like a great deal - buy at 20% BMV and refinance at market value or sell on and get an instant profit.  Sounds too good to be true - because it is!

Before you jump into your first auction you need to understand the hidden cost of buying properties at auction.

1. The guide price - this is the price in auction catalogue and this is the price used as a marketing tool to increase interest.  There...

THE QUESTION

I have a semi-detached house with a garage and wanted to extend the existing garage into a granny annexe.  

In the future I would like to split the deeds and keep the granny annexe to live in myself and sell the house to pay my current mortgage and have an income.

I currently have an interest only mortgage which ends in about 10 years, and my mortgage company said to put a request in to them and they would converse with land registry, if they agreed I could go ahead’

Is this a feasible project?

THE ANSWER

Here is the biggest barrier you face - the mortgage lender’s T&Cs.

if by 'granny annexe' you mean a self-contained fully functional living space with its own entrance, it’s not the regulations that prevent you, it is the mortgage lenders T&Cs - what they will and won’t allow you to do while they have a charge over your property for the money they lent to you.

Splitting the title is only part of he challenge.  First you need to...

If you’re following the Buy - Refurb - Resell or Refinance strategy you are likely to come up against the so-called ‘6-month rule’.  There is some confusion about what exactly this ‘rule is.

In truth there’s no such rule - it’s simply a practice that some lenders have adopted.  The problem it creates is that those lenders will require you to have owned a property for six months before they will consider a remortgage - or, if you’re selling it, will be willing to offer a mortgage to your buyer. 

If you’re doing a refurb with a view to refinancing onto a BTL mortgage then the simple solution is to get bridging finance for the first six months to cover the period of refurb and then refinance.  However, it gets tougher when you’re planning to sell the property quickly.

Does this mean that you can’t sell it?

Not at all.

If you’re selling to investors or landlords, it’s less of a problem as they...

THE QUESTION

Is it really worth the drama of owning a BTL and having 20% returns over 3 years when the Stock Exchange in my pension is Tax free and has higher returns? 

Or the drama of searching for a property, conveyancing paperwork, Stamp Duty penalty, touch-up renovations, eye balling for a good tenant, regular maintenance, annual HMRC tax returns, the risk of rent arrears, re-mortgaging paperwork, Capital Gains Tax, the risk of tenants trashing up the place, dealing with lazy Estate Agents, dealing with calls from Estate Agent to approve repairs etc.

THE ANSWER

The obvious points you are missing is leverage and to a lesser extent downside risk, put simply –

•  If you invest £100,000 in shares and you get a 20% increase - now your investment is worth £120,000.
•  If you invest £100,000 in a property as a 25% deposit, a 75% mortgage allows you to borrow £300,000 enabling you to buy a £400,000 property. A 20% increase in a £400k...

Property can be a lonely road to travel, unless you happen to work with a partner.  You’re investing big chunks of money and like any solo business, it’s easy to lose your ability to be objective.

Everyone is an armchair ‘expert’ and if you mention ‘property’ in any groups of people you’ll get lots of advice, most of it negative.  If you attend property networking groups at least you’re with like-minded people, but to trust other people’s advice you need time to get to know each other and learn about their background and experience.

What do you do when you need advice?

Support is critical - a trusted forum where you know that people don’t have another agenda and are genuinely interested in giving (and getting) support in their property journey.

The kind of support you need changes as you move along your property journey and that’s why I’ve created a number of options for property investors.

...

THE QUESTION

I am currently living in the Middle East, but have two properties in the UK, both are mortgage-free.  The value of each is approximately £250k and both are rented out to long-term tenants.

I want to start increasing my BTL portfolio size via the Buy, Refurb, Refinance method. Work will be done and managed by experienced family based in the UK.

Would you:

1. Re-mortgage one of those properties to release equity to fund the next property?
2. Take out a separate BTL mortgage (not linked to those properties) to fund the growth and continue with this method?

THE ANSWER

Because you have family based in the UK, the Cross Collateral bridging option mentioned becomes a possibility.

The choice of leveraging the equity in your current property is a choice between 

1. Mortgage at a lower rate, but with continual expense 

and 

1. Bridging at a higher rate, but for a shorter period.

If you feel that you are continually going to be having the money raised invested...

Here we are at the start of another year; did you achieve what you wanted to last year?

My review of 2021 from a property investor’s perspective is here.

If you didn’t do what you set out to do have you reviewed what didn’t work, what did you miss doing, were there things that you couldn’t do or didn’t do?  The seeds of the future are usually in the past, so it’s worth reviewing what did and didn’t work - and what changed your original plans.

I’m not suggesting that your plans shouldn’t have changed, after all, plans made in January 2020 were pretty much blown out of the water - or had to be radically revised - due to unforeseen circumstances.  Things change and plans should not be set in stone, but not having plans means that often nothing gets done.

So here are my top 5 questions to ask yourself as you’re putting your plans in place for 2022:

What was in your plan, but didn’t get done?  And why?

...

THE QUESTION
Do all lenders require a personal guarantee (PG) for a 70% LTV bringing loan? If so, is there any way to do a bridging loan without a PG (i.e. by reducing the LTV to less than 50% for example?)
THE ANSWER
Pretty much any lender lending to a limited company, rather than a person, wants a PG. This protects the lender from the shareholders winding up the limited company overnight (as they can well do) and risking any potential losses not being made good.
Borrow in your personal name and PGs are not required because the lender can just come after you for any shortfall. They cannot do this if the entity that borrowed the money doesn’t exist any longer. A PG just means that you are the lender’s failsafe if the company can’t or won’t pay up - no more, no less.
Any kind of business loan, including mortgages, lent to limited companies have PGs at their core, but mortgages are massively less risky for a bank to lend on.
Banks rarely lend more than 75% of the...