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  • Mortgages & Finance

    Funding 2nd property

    Hi All,

    My current house has no mortgage and is worth 190k.

    I have savings of 140k.

    I have found a property which I would like to purchase for a price of 125k. It should achieve a monthly rental of £600pcm.

    Advice on how best to purchase this property? Should I use a buy to let mortgage and some of my savings for a deposit? buy the house outright? or remortgage my own house and purchase the property?

    The house doesn't need any work doing and is ready to be rented out.

    My goal is to purchase more properties over the next few years, kind of waiting to see what effect s24 and PRA has on the local market.

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     As a cash purchaser, you have a huge advantage that you can use to leverage a deep discount.  You can complete quickly and you are not in a chain.

    I would be minded to purchase for cash, using that as leverage to achieve a significant discount, then use a 60% LTV BTL mortgage to redeem that cash and use again.

    This is only general advice though as I am not aware of your tax position etc.

    Professional tax and mortgage advice is recommended before making any decision on how to best deploy this money into property.

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    Interesting about the cash discount Vanessa.  What sort of discount would you ask for ?

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    Quick reply but when you say as a cash purchaser....do you mean use all the money from my own bank account or remortgage my own property?

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    I mean using the money from your own savings which more than cover the cost of the property and the acquisition costs.

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    Thanks. The only issue I see is that the last 10 properties I have seen at a "good price" have all had higher offers in that what I put it. Therefore, I am sure this property will have a lot of offers come in as well so trying to get a large discount on the property might not be possible. If I cant get a significant discount and the price is around the asking price....still ok to go ahead with the option of using money from savings?

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    I cannot answer that question as I know nothing about the property.

    There are deals everywhere.  My advice would be to use your cash to maximum advantage and be sure to state your position and ability to complete quickly.

    Look at multiple properties and put in low offers.  It's a numbers game.  Contact estate agents and tell them what you are looking for and ask them to get in touch if a deal falls out of bed.

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    Landlord123, being a cash buyer should put you ahead of the game.  Be sure, when you make your offer that you take proof of funds with you to show the Estate Agent. 

    Having worked in Estate Agents before (and dealing with so called "cash purchasers" now as a Financial adviser), many people class themselves (incorrectly) as Cash Buyers, even though they need a mortgage. 

    If the Estate Agent can see that you have real cash sat there waiting in a bank account, they will be more minded to push you to the front of the queue; after all, the Estate Agents don't get paid until the deal is done and they will want to get there asap.  Any idiot can put a high offer in, but unless they can complete, they are no use to the vendor at all. 

    There is something to be said for a bird in the hand, rather than 2 in the bush.

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    I have always put offers in on the phone and never in person. A lot of the BMV houses I go to see often have lots of people seeing them and they the estate agents end up doing a "put in your best offer by end of this date" which is quite annoying.

    Just called up about the viewing tomorrow to confirm the time and the estate agents have now said due to the amount of people interested they are doing open house and have 21 people coming to look at the house.

    Think I will need to start looking at houses which have been on the market for a long time instead and offer a lot lower than the asking price...this might have to be my new strategy.

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