Hi Guys,

I'm gathering some funds with the family in order to invest in more property next year.

The plan is to accumulate 100k and then use this for buying power.

One of the group has not yet bought a house so we were going to use their 1st time buyers power in order to purchase one property at a low deposit.

The plan is to buy 2 maybe more properties (in a bad state) refurb them and then remortgage at a later date to get some or all of our money out.

We want to avoid selling any to avoid the hefty tax bill.

I have a few questions if I may pick all your brains!

1. Is buying a property as a residential, refurbing it and renting it out (6months later) legal?
2. Is it possible to remortgage properties immediately after refurbing them?
3. Any other ideas on how we can best use/leverage our money to create a good cashflowing portfolio.

We are based in South London by the way.

Thanks Guys

JP

Hi,
In answer to your questions:-

When you buy a property with a residential mortgage, it has to be for that purpose and not as a rental property, or you need to obtain “a consent to let” agreement from the mortgage lender which a lot of the time the lender will insist on you paying a higher rate of interest on your mortgage loan. As long as there is sufficient equity in the property you will probably be better off re-mortgaging on a BTL product at 75-80% LTV. Regarding the legal side of renting out your property on a Residential mortgage product; Unfortunately if you don't inform your lender of your decision to rent the property out, and I stand corrected on this;- I believe you are committing “mortgage fraud”.

You have to always wait 6 months before re-mortgaging a property after purchase as a lot of time the mortgage lender or new mortgage lenders will only value it the same as what you paid for it even if you change lender.

The obvious answer to your third question to maximise cashflow is to find a cheaper letting agent with a good reputation as possible or look into renting the property as an “HMO” but an HMO in a lot of cases, requires accreditation from local councils etc.

regards
Chris

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(17-08-2012 01:43 PM)JP Source Wrote:  Hi Guys,

I'm gathering some funds with the family in order to invest in more property next year.

The plan is to accumulate 100k and then use this for buying power.

One of the group has not yet bought a house so we were going to use their 1st time buyers power in order to purchase one property at a low deposit.

The plan is to buy 2 maybe more properties (in a bad state) refurb them and then remortgage at a later date to get some or all of our money out.

We want to avoid selling any to avoid the hefty tax bill.

I have a few questions if I may pick all your brains!

1. Is buying a property as a residential, refurbing it and renting it out (6months later) legal?
2. Is it possible to remortgage properties immediately after refurbing them?
3. Any other ideas on how we can best use/leverage our money to create a good cashflowing portfolio.

We are based in South London by the way.

Thanks Guys

JP

(17-08-2012 01:43 PM)JP Source Wrote:  Hi Guys,

I have a few questions if I may pick all your brains!

1. Is buying a property as a residential, refurbing it and renting it out (6months later) legal?
2. Is it possible to remortgage properties immediately after refurbing them?
3. Any other ideas on how we can best use/leverage our money to create a good cashflowing portfolio.

We are based in South London by the way.

Thanks Guys

JP

Hi

1) Yes but tell the lender and get their permission
2) Try TMW Light refurb product which has a similar effect
3) Your plan looks good so far so go for it if thats the one you feel comfortable with

Buy each property in the name of one or more of the group who do not own their prime residence. Put all the bills and council tax etc in the same name during refurb so that there is evidence that this is their only prime residence. You will do better paying the council tax rather than claiming exemption during this time because the eventual tax saving will be way higher. Keep all these record and when the day comes that you sell on or transfer to another person in your group you will get great tax breaks. You can move each property around the group over the years and start the clock ticking again. Under present rules something like £40k off the gain and the last 3 years of the gain taken off before you reach the base figure for capital gains tax at which point you can also claim your exemption for that year.

Follow me on Twitter @landlordtweets

(17-08-2012 02:29 PM)Mary Latham Wrote:  Buy each property in the name of one or more of the group who do not own their prime residence. Put all the bills and council tax etc in the same name during refurb so that there is evidence that this is their only prime residence. You will do better paying the council tax rather than claiming exemption during this time because the eventual tax saving will be way higher. Keep all these record and when the day comes that you sell on or transfer to another person in your group you will get great tax breaks. You can move each property around the group over the years and start the clock ticking again. Under present rules something like £40k off the gain and the last 3 years of the gain taken off before you reach the base figure for capital gains tax at which point you can also claim your exemption for that year.

Follow me on Twitter @landlordtweets

In theory perhaps a good strategy; but an awful lot of trust issues involved.

thanks for the response guys.

The situation we're facing is the property in this areas we are looking in south london (balham/clapham) are so high that yields are only around 4-6%.

The area is great for long term as the area is very desirable. It is also close to all the investors involved so easier to manage.

one idea we were thinking was buying a 1 bed and converting it to a 2 bed, and remortgaging some of our money out on the higher value.
Or, maybe flipping the first few to create a bigger cash pot to be able to put down a bigger deposit on the next property in order to make more cashflow.

Any suggestions?

Thanks

Hi Guys,
I'm digging up this old thread as since I posted it a couple of things have changed.
The strategy is now to buy properties in the 100k region cash at BMV and flip straight away to make around 10% profit.
I've had a little bit of experience sourcing properties (sourced 3 properties a few years back at 20% discount) in my local area through leafleting and negotiating.
So we plan to use the cash to appeal to the vendors who are after the fast sale.
Anyone do/done this? what worries me is the tax we'd have to pay per sold property...Is this a wise plan?
Thank You for your input