James
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Registered: 1st Jun 02
Location: Surrey
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It's pipe dream time 
I'm quite keen on buying a property at auction that needs work doing, then refurbishing and selling it on. My dad's a builder and my friendship group includes an electrician and a carpenter, so I have a few contacts. Plus my uncle does this for a living.
My biggest question is financing. I already have a mortgage on my property, by the time I come to do this, the LTV on that will be about 80%.
Would I need a separate mortgage, or can I get the same mortgage extended to cover the 2 properties?
If I do need a separate mortgage, would it need to be BTL or not? I won't be letting it out at all, and initially I'd be looking at quite a small project with a quick turnaround (2-3 months).
Thanks.
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James
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Registered: 1st Jun 02
Location: Surrey
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Just to add, at 80% LTV, I will only have about £50k equity in my property, so an equity release wouldn't be enough, unless my first project was a garden shed
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Aaron
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Registered: 9th Aug 04
Location: Cottingham, East Riding
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inb4theportfoli.....
oh 
In all serioueness though, if you do need a second mortgage, wouldnt an interest only be the best option if you want to keep costs down? However, to make money on this, the value of the property in question needs to go up (which shouldnt be a problem if you plan on refurbishing it)
Not sure why BTL would be needed tbh.
[Edited on 09-05-2012 by Aaron]
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James
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Registered: 1st Jun 02
Location: Surrey
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Yep interest only would make sense. The theory is that I would only make 2 or 3 mortgage repayments anyway.
My biggest concern is struggling to sell. I could always rent it out but the income tax on the rental income would be a big hit.
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AndyKent
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Registered: 3rd Sep 05
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No need for buy to let. You'll be assessed for the mortgage based on income same as if it was your first home, except you obviously have your actual home spending to take into account. Affordability checks still apply.
Or, you get a business loan as a completely separate arrangement.
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Aaron
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Registered: 9th Aug 04
Location: Cottingham, East Riding
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It isnt quite as bad as you think (in my opinion of course), unless it's going to tip you over into another tax bracket. You should only be paying the same rate of tax, but just on more money right?
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James
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Registered: 1st Jun 02
Location: Surrey
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quote:
Originally posted by Aaron
It isnt quite as bad as you think (in my opinion of course), unless it's going to tip you over into another tax bracket. You should only be paying the same rate of tax, but just on more money right?
Yeh it will be the same rate of tax. But the rental income compared to the mortgage repayments is what I'm looking at. Pre-tax, the rent should be slightly more than the mortgage repayments, after tax, it's considerably less. Which means I'd be making a loss every month.
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Aaron
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Registered: 9th Aug 04
Location: Cottingham, East Riding
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Yeah fair point, i guess it depends on how much the mortgage repayments are compared to how much rent it can command. This is by the by though, because renting isnt the plan
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VrsTurbo
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Registered: 8th Jun 10
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If its a complete shit hole, i.e no kitchen some mortgages places wont approve a mortgage on it with out a huge deposit
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James
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Registered: 1st Jun 02
Location: Surrey
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This is true. I need to spend some time familiarising myself with the auction market. I want to start small, mainly because of finance limitations, hopefully if I can make £10k on my first project, that can go towards the next one. Then if it all goes wrong, I won't lose too much money.
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James
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Registered: 1st Jun 02
Location: Surrey
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I'm hoping to find a place that has just been untouched for about 40 years 
So hopefully it will have an old kitchen/bathroom.
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AndyKent
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Registered: 3rd Sep 05
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Good luck. Auction guide prices are often silly low compared to the sale price to gather interest.
Don't assume because its priced low in the book it'll be low in reality.....
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James
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Registered: 1st Jun 02
Location: Surrey
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Yeh this is all stuff that I'll need to familiarise myself with.
My other concern is that it looks like if it's done solely for profit, it's subject to income tax rather than CGT, which makes it a less appealing move. Still potential for profit though.
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James
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Registered: 1st Jun 02
Location: Surrey
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Even if on the first project I only break even, it would be a great experience. I've always fancied getting into that kind of work, so it would allow me to decide whether or not it's something I want to pursue on a bigger scale.
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