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Financing an auction purchase

ninja learning Jun 20, 2021


I'm looking for a little guidance on financing an auction property.

My brother and I have construction management experience and are looking at a house coming up for auction shortly.  We have roughly £50K to use as a deposit and to get any renovation works started.

We're considering a house with a guide price of £280K and would pay up to £300K for it.  We estimate that it would need £100k of work to bring it up to scratch, including a large extension, and would be worth well north of £500K once complete.

I have spoken to a broker I found online who have offered 65% LTV, which leaves us a fair bit short of being able to purchase and complete the project.

Are there other financing options that won't completely destroy the margin? I've considered Mezz, but rates of 20% aren't particularly attractive!

Second charge lending has also cropped up before so am interested to learn more about it. I do not have property in the UK, but my...

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Don’t get auction fever!

ninja learning Jun 05, 2021

Property prices at auctions are going crazy!  The bidding is pushing prices way above their market value - not just by a couple of thousand, but by tens of thousands.

Here are a couple of examples I’ve recently come across.

A property was put up for auction that was located in a street where the best price for any of the other properties had been £230K.  The property being auctioned wasn’t in good condition and it was estimated that it would need about £45-50K to bring it up to its full value.  The winning bid was £220K - before stamp duty, legal costs and auctioneer’s fees.

Crazy! – that buyer is going to be nursing a serious loss when they get around to doing the necessary modernisation. 

Another property in a street of small 2-bed terraced properties was up for auction and the best price any of the similar properties had made in the recent past was £120K.  It definitely needed a facelift, which would...

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How to fund the purchase of a commercial property

ninja learning May 20, 2021


If an asset holding company that owns a portfolio of BTL properties wants to mortgage one (unencumbered) in order to loan those funds to another company (a child of that company) for the purpose of buying a commercial building in cash (i.e. office and warehouse) is this feasible or would lenders take issue with it?  Technically it's a vacant commercial unit.

This needs doing quickly as the deal is live right now.


It would be wise the check out with your accountant on the tax implications of your idea.  From a lending point of view, lenders have no issue with you raising money for a deposit from the equity of other properties you own, this is done frequently without problem. 

Where you will hit a problem is that you want this done quickly/immediately, it won’t be. It will take longer than that for the reason that mortgage lenders for the BTL mortgage are slower at processing mortgages than before Covid, for a variety of reasons but it...

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Are you leaving deals on the table?

ninja learning May 05, 2021

When a deal falls through and someone else ‘buys’ the property, what do you do?

Properties are selling fast, the market is buoyant and the competition between buyers is hot.  It’s not just investor v. investor, you’re up against anyone who is looking for their next home too.  So, you’ve made an offer and the answer is ‘Sorry, someone else has made a better offer and it’s been accepted.’  Now what?

Most people write that one off and go on to their next deal.  But what if you haven’t actually missed out on the deal?

Did you know that one in every three deals fall through?

The sale is not complete until contracts are exchanged and that can take weeks - usually months.  As the saying goes ‘There’s many a slip between cup and lip’ and in property that is very true.

People don’t complete the deal for lots of reasons - they may have a change in personal circumstances, find another...

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Build your support network

ninja learning Apr 04, 2021

Property investment can be very much a solo career, but a smart investor has a strong network surrounding them.  It makes everything easier and projects go more smoothly.  These are my recommendations for who you should have in your little black book.

  • A solicitor who is familiar with property - and, if you’re serious about building your portfolio, understands how bridging finance transactions are carried out and is sufficiently flexible and efficient to carry out the legal requirements swiftly.
  • A good independent broker who can access the whole market and has experience of mortgages, bridging and development finance and will give you good advice.
  • A reliable builder, carpenter, painter & decorator, electrician, plumber, and maybe a gardener, who will help with refurbs.

It’s wise to build good relationships with your local estate agents too.  If they know you’re a repeat purchaser and you can process purchases efficiently they’ll start to...

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Setting up a profitable deal

ninja learning Mar 15, 2021


How would you structure this to use as little of your own money as possible?

Property: 1 shop downstairs and 1 residential 2-bed flat upstairs

Single freehold title

Buying price £65k

  • The shop is leased for £4200/yr.
  • The flat is currently vacant (could bring in £4500/yr).
  • Some value can be added by extending the lease on the shop, and placing a tenant upstairs.
  • Minimal refurb required. Both up and down currently share an entrance.
  • Vendor finance may be an option for a few months.

How would you structure the offer to the vendor?

How would you add value?

What is the best way to finance it?

At what point would you put it on a mortgage?


The shared entrance could be problematic if the shop owner and the flat tenant are unconnected 

  1. How would the tenant get access to the flat out of shop opening hours 
  2. How would the shop owner guarantee the security of their stock, if the flat tenant had the keys to the shop?

Your ability to get a...

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Are repossessions a good deal?

ninja learning Mar 05, 2021

The answer to that is that it depends on who is actually selling.  If you’re purchasing from someone who has finance problems and may be in arrears with their mortgage, it’s definitely not a good idea – mortgage lenders prefer not to lend when you are buying from owners experiencing financial hardship.  However, if you’re looking at properties that the lender has repossessed and are now for sale - with vacant possession - they could be a profitable purchase.

The reasons for repossessions are many, but they all come down to the current home owner being unable to maintain their finance.  This might be because they’ve lost their income, a divorce whether neither party is able to maintain the property alone or a family fallout where joint heirs exist.

Realistically, the lender just wants their money back - with no regard as to whether the current owner gets anything out of the deal or not.  That’s why repossessed properties often...

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Buying below-market-value property

ninja learning Feb 20, 2021


What are the best sources to buy BMV?  I want to take my portfolio to the next level and maximise on returns.


This is a sensible way to leverage your profits and there are a few simple rules here.

1.  Only spend time with sellers that NEED to sell.  Everyone on Rightmove wants to sell their property, otherwise why list it.  But probably 90% + are happy to let it sit there until they achieve something close to the asking price. 

What you need to find are those few sellers with a more urgent need to sell, they can’t wait 6, 9 or 12 months to get a good price.  They need to sell quicker and quicker means cheaper - in other words they’re motivated sellers.

These people may have to move for work, to look after elderly parents, finalise a divorce or want to complete probate.  They don’t have time to sit around waiting for someone to buy - and then wait for a chain to resolve.

2.  Only look at properties in...

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How to finance a B&B

ninja learning Jan 20, 2021


Who would be a good lender for existing B&B properties, with an estimated value of £400k?


There are specific commercial lenders that lend on B&Bs.  

With very few exceptions, B&B owners will have run their B&B in a certain way.  Show me a B&B owner and I can give you a very accurate description of them and their business mind-set, a B&B owner avatar, if you like.     

With numerous B&B and guest house finance arrangements under our belt, we know there are, invariably, very big issues getting mortgage on them.  On the face of it, it looks like difficult to almost impossible to finance these properties. But, if you know the workaround to it, it means you can pick them up very cheaply.   

The first thing you need to get from any B&B owner is their last 3 years accounts, because any commercial lender wants to see how much cash the business is generating to support a mortgage payment....

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New Year, new goals

ninja learning Jan 05, 2021

So here we are at the beginning of another year.  While we couldn’t have predicted how 2020 went, the people who have come through it best are those who were able to flex and rethink their strategies quickly.

If you’ve been following me for a while you’ll know I believe that mind-set is the key to success.  Successful people believe in themselves and their abilities.  Successful people also set goals.

As the Cheshire Cat pointed out to Alice ‘If you don’t know where you’re going, any road will get you there.’

Given the unexpected events of the last year, that might seem counter-intuitive.  After all, if you set goals in January 2020, the chances are that, by the end of March, they’d become difficult, if not impossible to achieve.  But that doesn’t mean you shouldn’t set goals.

Goals are not set in concrete - they’re an end result to be achieved.  You don’t ‘do’ a goal,...

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