In recent reports it has been suggested that if plans proposed by the Bank of England are to go ahead then it could mean that landlords would have to find deposits of up to forty per cent in order to receive a buy to let mortgage.
There have been other reports that suggest that landlords are struggling to find deposits in order to expand their portfolios as it is because of the increase in property prices; the proposed changes could make this worse.
As a result there has been a new trend sweeping the landlord nation and that is refurbish to let.
The principle is pretty simple, purchase a run-down and affordable property, refurbish it then let it once it is in a better condition. Whilst this is a good idea in theory, in practice there is a little more to it.
Just Landlords provides an insight into what a refurbish to let property really consists of.
Locating a Run-Down Property
With the rapid increase in property prices it is now very difficult to find affordable run-down properties, especially as this new trend is becoming more and more popular.
An increase in demand and a decrease in supply can only mean one thing and that is higher prices.
To find a run-down property, especially in London, it is essential that you are constantly checking listings.
If you currently have a large portfolio it is probable that you don’t have the time to do this yourself so you should consider hiring a letting agent. This is obviously a paid service but in the long run it will save you time which will enable you to grow your portfolio and therefore your income.
Finding a Suitable Property
When it comes to finding the appropriate property for your budget this does take a certain level of skill and knowledge. You need to be able to decide if a property is in need of a quick spruce up or a complete renovation!
The latter could end up turning into a complete money pit whereas the former could enable you to grow your portfolio in the long term.
Before you purchase your chosen property it is essential that a survey is carried out as the building could look like it just needs a quick lick of paint whereas it could actually have some serious issues.
These are a nasty surprise once you have signed on the dotted line!
Financing the Refurbish to Let
It is unlikely that as a beginner you will be able to afford to purchase your chosen property outright which means that you will need a mortgage. As soon as you agree to the mortgage you have to ensure that you will be able to make enough money to repay this otherwise you could end up having the property repossessed which could be detrimental to your business.
The mortgages director at Shawbrook, Stephen Johnson, has said:“We’ve always targeted seasoned operators who are less risky – we tend to shy away from first time landlords.”
If you are a beginner and struggling to find a suitable mortgage mortgage expert Ray Boulger has suggested: “Landlords with multiple homes could refinance existing properties and so keep to lower rates.”
Mark Harris has suggested, “If a landlord is sprucing up a property, they can keep back some of the money that would otherwise go towards the deposit to fund the works.”
Refurbishing to let properties is a good way to expand your portfolio especially during a time where property prices are high although it isn’t as easy as it might first seem. If you are looking to start your portfolio you are best starting small and taking on larger projects as after all, practice makes perfect.