After six years on the road 60hrs+ a week and very little to show for it I am looking to take the leap onto the development business, i know very little about the best way to go about this which is why i kindly ask for advice.
Recently a 1 bedroom flat has appeared on the local press to be auctioned at a guide of 10K, local prices for a property of this size are currently around the 50-55K for a solid refurbished property, The problem i have is that i have very little savings and walked out my job around 8 weeks ago, will this impact on my 'borrowing' power? I looked at the property in question and i believe at least 12-15K is required to put it straight, i have less than 2 weeks before auction day, Currently i have a joint mortgage with my girlfriend 47K still owed and she is willing to share the name on any second mortgage if necessary. Whats the best way to go about this????????

Thanks in advance for any help!

Also wondering if any forum members have ever used 'Buildplan' to fund a development? If so, it would be great to gather some opinions on this as it seems the most viable option to me at present.

Thankyou

So you are risking your very small savings (enough for your deposit even?) and know little about development. I take it you are expecting to turn over this prop. fast, to give you an income? What if it does not sell? Is there a demand?

Whatever fig. you put on renovations, it will nearly always be more, be prepared for that, legal costs and mortgage payments. Yes, your borrowing power will probably be affected, not having an income... You should start your due dilligence now and researching a good financial product is key. However you are on the wrong end of a changing financial spectrum. Most mortgage providers, especially btl/development mortgage providers have tightened their criteria = worse ltv's, higher arrangement fees and overall tightening of terms.

With auctions, properties usually sell for more than the guide. The days of auction houses with 50 props. and 5 buyers are gone, you are more likely to find you will pay more at auction if you are not careful. You will be expected to put down a deposit on the day and complete within 14-28 days. In your position, of the brief info. you have given, I would look for a new job and then spend a few months educating myself on property and finance, with the help of the internet and all the forums you can find. Investigate taking equity out of your current property. Look up the postcodes of properties you are interested in on ourproperty, you will see actual land registry prices and dates - in your position you cannot afford to make a mistake.

That said, if you can build up a cash pot, there is money to be made in a slow market, but I question putting all your eggs in one basket with the market against you. Cash is key to riding out the storm and the market will be a little flat for a while, you'll be able to pick up bargains next year too.

quote:

Originally posted by TheTrickyTrucker:
Recently a 1 bedroom flat has appeared on the local press to be auctioned at a guide of 10K

Take strong not of the last poster's point.

It is just a "guide price". Highly unlikely you will get it for that and the selling price could be lots more.

Thanks for the advice Captain, you sound like a very knowledgeable person.

Property renovation/development is something I have had a particular interest in since I purchased my first property 3 years ago, the prop(a large victorian 2 bed flat) was very tatty and unloved. A year later and the prop was refurbed to a 'half decent' standard. plumbing, tiling, flooring and building a new stud partition were all jobs that i took on in an effort to reduce costs. I payed 40K for this prop taking a northern rock 125% mortg to cover refurb costs,
its now worth 60-65K so there is a little equity in my home but not much.
Taking on refurbishment work myself instead of doing driving work is my aim, mainly to cut costs/increase profit but also to keep an eye on tradesmen and quality of workmanship.

Taking on a second property has been on my mind since i completed works on my current home but my career choice means im always away from home which is why i decided to pack my job in, unfortunately due to my location its either "have a job" or "have a life/spare time"

I strongly expect the prop im interested in to sell quickly, possibly attracting a premium as it has its own back door leading to a substantial back garden, This is extremely rare in the area I live. Demand for all property in the area I live is high possibly due to the low prices and also possibly due to the lack of useable land even though it is considered as a 'rural' location

The challange I have is getting a mortgage potencially 20K+ THEN raising 15K or thereabouts for renovation.

As a 'newbie' (only 24yr old) I find ANY kind of debt daunting. Ive decided ive had enough of slogging my guts out for little reward and want to take the risk, I feel now is a good time as i have NO debt whatsoever, our cars are paid off, we have no credit cards, its just the mortgage i need to pay.

I know if i were to go ahead with the property i have in mind i need to move on it now.
Or should i return to the 'lone ranger' lifestyle behind the wheel and wait until next year?

Problem is you might be looking at quite a bit more than £20k for the property.

First things first you need to move quick on getting funds. As Captain said, you need to have the money in place for the day of the auction.

If you've seen that guide price and thought 'bargain' so will a fair few others who have the funds immediately available.

So, instead of wondering whether you should wait and get another job, find out if it's viable financially because you've no time to waste on that front.

Let us know how you get on.

Fair play to you, you've thought it out and made a decision.

But you're sooo young still and next year will still yield more bargains. You have so much information still to absorb from the internet and talking on forums like this and others. Finance is key, research, calculations, etc. Start looking on mortgage brokers websites to find out about lending criteria for a start.

I bought a property last year that I did not anticipate buying and financed the deposit off 0% credit - so it can be done, BUT I already am an experienced landlord, so it wasn't a big deal for me. Good luck and... can I mention it again, research and sums!

I am amazed at your bravery. Really, my advice would be to get a new job, save up and learn about all these things first. I didn't know £10k properties still existed, i haven't seen anything that wasn't shared ownership or a garage or even farmland for under £40 for a long time. My partner says to always add £10 to an auction price.

At that price there must be a catch. Check Homecheck website for flood risk and crime stats etc and get a survey done. It might be a gem but check first.

General advice when starting any business of your own is that you don't give up your day job until the business occupies so much of your time that you can't do the day job any more. And with no current employed income you're not going to be able to borrow on a conventional mortgage at all, it will have to be a commercial mortgage. Mortgage company will want wage statement from employer or P60 or certified 2 years' accounts if self-employed for conventional mortgage.

Are you actually experienced at doing up? With current markets flat or falling the only way you're going to make a decent living is to turn the property round fast - like 3-4 weeks from beginning to end. Property doing-up is all about experience and managing, not just willingness to get your hands dirty. You need a sound knowledge of the various regs and good contacts.

It's well worth watching BBC1's auction buying prog in the mornings to see just how fast and professional the ones who make a profit are.

Hi, I am an estate agent/letting agent - the days to make good money out of property are gone. It is very hard to find good deals now adays - pretty much all been snapped up and developed. One area you could look at if you are really serious is letting to families who are struggling to buy their own family home. You need to target 3 bed houses that you can rent for reasonable rent but still make fair profit on or rely on capital return. It is hard to find these properties but with repossessions going up the way they are there should be more of these coming to market. Check out with your local agents and see what they advise.