The problem with buying property as an investment is that you need to have enough money to put down as a deposit – and then it’s locked into your property for six months or more, until you can remortgage. The days of ‘no money down’ mortgages are gone; you need a deposit to get any mortgage these days, usually 25% of your purchase price.
At this rate you’ll be lucky to add two properties a year to your portfolio, unless you have a big nest egg.
The secret is not to lock your capital into a mortgage, but to use creative financial packages specially developed for property investors.
Don’t lenders love property investors, because they have plenty of assets so their mortgage is secure?
Buy-to-let lenders like their clients to have a nice, secure full-time job earning a minimum of £25,000 a year and have their own cash for at least a 25% deposit. If you have too many properties it can make them nervous in case you leave your secure job to become a full-time investor.
They don’t like people who want to remortgage their property after six months when the property has been refurbished and is now worth a lot more. Besides it’s not going to do your credit record any good at all to have a number of early redemptions on your file – and every mortgage you get shows up on your credit record.
Serious property investors aren’t most lenders ‘flavour of the month’.
Not if you want to build your portfolio using traditional mortgages.
Since the flexible mortgage products were withdrawn from the market in 2008 ‘no money down’ strategies are really describing a method of concealing the true purchase procedure from the lender. This is fraud and any legitimate investor or financing company will have nothing to do with it.
However, there are creative means of putting together finance packages that are entirely legal and don’t put the lender, the purchaser or the property at risk. Using bridging finance intelligently gives you much more flexibility – and the potential to make MUCH bigger profits without tying up your capital.
To be successful in bridging finance you need an experienced bridging lender and a solicitor who understands bridging finance and can complete transactions in days, rather than months. Then the sky’s your limit!