I’ve been in property for decades and I remember the days of no-money-down property purchases, but these are long gone.
You can’t get a 24-hour remortgage any longer. Most property investors now see it as a longer haul as that 25% deposit means money is trapped in every property you buy. The processes to get your money out fast and move on to the next purchase that made property a great way to generate an income have gone.
Does that mean that it’s no longer possible?
No – you just need different strategies – and I’ve been teaching investors these for several years.
There is NO element of mortgage fraud in my strategies. At every stage there is full disclosure regarding the transaction to every lender involved. Using creative finance it is possible to buy property, leaving very little of your own money in the deal.
Using bridging finance with a clause that means works can be carried out on the property between exchange and completion. This means you pay a small deposit (typically 10%, but it could be less) and get your money out on completion.
Many investors begin to sweat when they hear the term bridging finance. Whilst it is true that such finance can prove expensive, when used effectively it can be a great tool for securing a deal without using too much of your own cash. You will certainly need some cash to make this strategy work, but it won’t be stuck in the property for a long period of time.
It is not as complex as it sounds. With the right lender you can get your property valued on its post-refurb value – NOT the purchase price. This means you get a much higher percentage of loan to actual cost.
The bridging loan provides you with the funds to carry out the refurb and by the time you’re ready to complete you have a much higher value property.
You can sell the refurbed property at full value and repay your bridging finance or, after six months, you can get a normal BTL mortgage on a property with a tenant in place. The key is to be able to estimate accurately how long it will take you to turn the refurb around and either resell or find suitable tenants. This will dictate the term of your bridging finance loan.
Yes, bridging finance costs more than a high-street BTL mortgage, but it gives you many more advantages. With the right lender you can get more money up front and there’s much more flexibility. You can turn properties around faster and get your money back out – so you can be on to your next deal.
If you don’t have a bottomless bank account, it lets you grow your property profits much quicker than the traditional methods – it makes much more sense.
Want to find out about this and other strategies? I run one day Masterclasses for people who want to take their property investment to the next level. Find out more here.