General (main property discussion here) - Credit Limit

As Alex mentioned, when applying for a BTL (does that apply also for buying, to renovate, and sell for profit?),

That you put down your a property developer, so they dont need proof of income, well, i have a friend who may do this with me at the start, he has a squeeky clean credit rating, but hes unemployed!!

My question simply is, how does the mortgage company tell you what you can have? For BTL and renovation and selling.

As if he has no job, and hes the main applicant (as he has good credit), i cant see how they decide our credit limit.

Also, anyone know a good place to raise the deposit?

Matt

Am I right in saying that you can get 130% mortgages if the extra money is going to develop the house?

Very good question Frank, i am very interested in the answer to it!

Matt

Matthew - I think you need to speak to your mortgage broker - he should be able to advise. Frank -I think you are referring to the Mortgage Express deal - residential not buy to let.

hi, matthew where are you from? how old are you? what skills have you got? what makes you think YOU can turn around a house and make a profit in a falling market?when experienced developers with a lot of financial clout are even warey.

i'm not knocking you,i ask these questions because i admire your determination just be carefull. i've just secured my first bts and am in the process of arranging the mortgage,the best rate i can find without immediate tie ins/redemption clauses is 6.74% and that is £500 a month on a 85000 mortgage with me having to release 20000 on my own house and then find the money for the refurb.

AND i can do all the work myself including gas and electrics and can get everything dirt cheap (kit,bath/bed)through my fathers shop.AND i've got a tenant ready to pay the mortgage till sold

i'm not trying to put you off, its just a lot more than i had bargianed for and massive risks in the current market if interest rates go up after the election that 6.74% could end up being 7.5% till sold but i know through my job i can pay the extra dosh. also once i get the first out the way i know it'll be easier

why don't you try what i was going to do and (still may) is buy a small off plan cyprus or bulgaria 30/40000 and use a credit card for the deposit transfering the balance onto a 0% for 9 months? you may make 7-10k in this time and then assess the state of the uk market in 12/18 month

anyways good luck,wish i had a few mates like you all they wanna do is get pi***d

Hi Chris, dont worry, you wont be able to put me off lol, my uncle is a property investor and he just paid cash for a new home, costing £250,000.

Hes giving me advise too, but why get advise from 1 man, when i can come here and meet new people, that also do this for a living (or on the side).

I dont really have any intention of buying in the UK at all, as it is falling, im more interested in buying in Florida, where the mortgage is $500 a month, and i can make £400 a week from holiday makers.

But i wont rush into ANYTHING, without learning first, which is what im here for :o)

You asked some questions, im 21, 22 in 3 weeks (time goes too fast!!!), im in Essex, and what skills have i got? No practical skills yet, im just researching and learning, so im not 1 of these people that rush's into it and then goes bankrupt 2 years later ;o)

And while im learning, im saving a deposit, as to buy in America, from here, you need AT LEAST 20% deposit.

Thanks

Matt

Matt what is the average let period of a holiday home? Surely it cannot be let 52 weeks of the year. have you researched that?

Hi Matt, just a quick a note to advise that you look VERY carefully at the tax situation in America. You end up paying god knows how many taxes to the local council (or equivelent) and the state.

Then if something happens you don't like... you're the other side of the Atlantic!

I was thinking about it but changed my mind

Hi,

Frank - Yes i have deeply researched it, my answer to that is, if the mortgage is $500 a month, thats around £250 to £300 a month, i can pay this with my current job if its empty, if i can rent the apartment out for 1 week out of a month, i can cover the mortgage payments and maintenance fee's, - all year round!!! Even i went to Florida last january, and it was 30 degrees Celcius.

Julian - Thanks for the advice, ive looked into this already, and i would be liable to pay UK tax AND (YES AND!!) USA tax, thats a bad point to the idea, BUT, when i think about it, you can never skip tax, and it will always be here, and if the numbers add up, and im making money, i may aswel deal with the taxes i must pay, and keep a positive attitude.

Thanks

Matt

Damn, i missed a question/comment, sorry Julian.

"Then if something happens you don't like... you're the other side of the Atlantic!"

Yes ive thought of this, i know i cant hop on a plane everytime something happens (although i wouldnt mind ;o), but there are UK people in Florida, who own companys that look after your property, collect rents, clean it, and maintain it (for a small fee), thats the "fee's" i was talking about, if i remember what the guy said, i beleive its 15% of the rent, so the numbers still add up.

Matt

hi matt i was looking at florida also,i can't think of anywhere i'd rather invest. but i've been put off by the running costs which are astronomical - management,pool maintenence ,lawn maintenance,pest control,cable t.v,telephone,cleaning,homeowners association,gas,electricity,tax,insurances (everything needs insuring out there) and these are just off the top of my head not to mention furnishings. you need a lot of money behind you to cover these also your getting paid in dollars so if the e.rate drops which it will over time these bills will be massive in sterling. and prices over there have gone thru the roof last few years more than england

forgot to say i think its better if you've got a lot of money to put down as a deposit so when sterling does drop against the dollar you can sell and convert the equity back to sterling and make money off it

Hi Chris, good post

Yes running costs are alot, BUT on the positive, items in america generally are cheaper, than items in the UK, so you save money there. When i say items, i mean washing machines and furnishings.

Yes the exchange rate will drop over time, but for £40,000 you can buy a hell of a nice place, in a co-op building, (shared pool, gym, parking etc), and they actually go in and clean the place for you.

Telephone, the renter would pay that bill, i looked at 2 locations, the obvious ones, Miami, and Orlando, both could be rented out all year round, with my calculations, you could make £1200 a month profit, IF it was rented for all 4 weeks of the month, thats at £400 a week (which is actually quite cheap).

Im thinking long term investment on this, so i would be able to sell it for the £40,000 or more if its gone up, in 10 years when the mortgage is paid off.

Oh, yes, £300 a month is a 10 year mortgage.

As you need to put 20% down as a deposit, so its an 80% mortgage.

Thanks

Matt

hi matt,

sounds too good to be true mate,thats a 36% yield with free holidays too.

is this a short term let (holiday)?

if you have any info on the above i'd love to take a look

cheers

Hi Chris

I dont mind saying all i know on this, even though most developers wouldnt tell you things like that lol (but im not yet)

The market that would be renting it would be holiday makers yes, an old friend has a property in Orlando, and he just booked and booked people in, thats who i got the idea from.

I dont know how much to say now, as im desperate to get into this myself......

Thanks

Matt

With a partner, or without lol

Matt

Hi Matt, Chris,

I've been following this thread with interest. I too recently looked into Orlando, Florida.

Deposit is 20% subject to status. Closing costs are 4%. (i.e. 4% on completion). The mortgage company's want to see you can cover the rent for 6 months too. They either just check you have the funds or sometimes (depending on how they feel, I was told - i.e. possibly the majority of the time ) they get you to deposit it in an account for the duration of the mortgage - Ouch !!!). So add another 6 months mortgage payments to the costs as well as the 4% !

This is a quote from the sales brocure (based on 2 bed condo) :-

Admin, pool, yard, pest control = $100 Utilities = $125 Cleaning (twice monthly) = $100 Repairs and replacements = $25 Homeowner Association = $50 Taxes and insurance = $ 100

Total = $500 per month.

Check your Zoned correctly and community charges can be huge !!! They say to base rentals on 70% occupancy. I guess all this is optimistic as they are "selling" them.

I went to a good presentation 2 weeks ago and eventually found out (after lots and lots of asking the same questtions) that also the agents aren't particularly brilliant over there, as they have so many properties on their books that they can't give it the individual attention that perhaps you yourself would. I read between the lines here that it means to get 70%+ occupancy you have to fill the remaining bookings yourself. This isn't a problem if you have got lots of time / friends (ideally one for every week of the year ;-) ).

I'm not trying to be negative here, just putting in my 2 pence worth ! I am not too keen on all the hassle of finding 36 - 52 sets of tennants per year !

Might be worth a punt in putting down 20% for an off plan (12 - 18 month completion) though and gambling on the dollar re-adjusting to gain on the exchange rate and a modest 5%pa price rise ?

Post back if you do go for it and let us all know how you get on !

Cheers, and good luck,

FM

Forgot to say that the agents commission is 15 - 25 % plus taxes !!

FM

ha'way man matt,spill the beans,this forums for sharing info, read rich dad poor dad - "helping others to be financially literate and you will become" dunno what the rest is.

fm - no i wouldn't want the hassle of finding any tenants at all,apart from meself during january,think i could just about drag meself over there

so $500expense plus mortgage at $500 and lets say an extra $200 others = about£500 at the minute so 3grand in an american bank account for 6 months peace of mind.suppose its worth doing coz when the dollar does re-adjust, hopefully you'll have a dollar reserve built up for when its empty. by the way, do the rough figures you mentioned still apply for lets say if its empty for a month?

i think i'm talking myself into this ,it sure beats buying a two bedroom terrace in bishop auckland for 70k

fm

how much was the 2 bed condo?

Hi Chris, and Funky Me

Its ok Funky, you were not being negative, i knew about the 6 months mortgage payments upfront, as i spoke to a mortgage broker that deals with over seas mortgages for FL, its ok, as you would have to pay the 6 months mortgage anyway, they just want proof you have it.

Its very important with location in FL, as who would want to rent your property in a street where people sit outside on sofas drinking? (ive seen that), actually go to FL and look at everything before you put cash down.

I dont know how much the property you looked at costs Funky, but theres literally thousands of FL propertys (and all over the US), here: http://www.realtor.com/Default.asp?poe=realtor

You said i would have to find 30% of the tennants? I think ide use that 30% myself lol

Thanks

Matt

CL :- You can get them from between $140,000 (They had all nearly gone) and $200,000 (Some of the 190/200k's left - for Sept Completion)

MH :- It's not always just 6 months up front proof, some mortgage brokers actually want you to deposit it in an escrow account (i.e. it stays untouchable by you till the mortgage is finished - They effectively hold it as a mortgage indemnity premium) It isn't quite just paying in advance !

Anyway, seems like you have the money anyway so don't worry about it, as I said not all of them want it and looks like your company don't (at the moment) and could be good when the dollar re adjusts and you sell up !

What I was informed was that you would need to work very hard in conjunction with the agent out there in order to fill it up for 70% of the year ( I don't think you can realistically expect to get near 100% rented occupancy - You would have to be living in Disney Land to beleive that....hey....wait a minute.... ;-) )

Just for your info I think that the 2 bed Condo's are the best bet in terms of rental income if you want to keep them and rent them out. Otherwise, I'd go for a more expensive 4 bed condo off plan and flog it on immediately you complete.

If you get a 2 bed condo to keep and rent out I would suggest you get one in a community where they aren't just about to put in a massive equestrian centre / facilities for the walk in public or the likes....as guess what ? ....That's right the cost goes onto the community fees of the people living in that block. They pay, everyone else enjoys !!! Doh ! You want to get one just over the road, if you know what I mean ;-) Most have a pool on complex which is included. avoid the Villa's as you have a whole lot of maintenance fees. (i.e. who cuts the lawn, cleans the pool for you) Whereas in a complex that's all included free with your massive community fees !

The ones I looked at were 7 mins drive to Disney, Condo's with pool etc. 2 Beds $190/200k 4 Beds $250k. There isn't a big market for the 3 Beds allegedly.

I would have gone for a 4 bed off plan myself but I'm committed to some off plan stuff over here at the moment and couldn't risk delays causing me hassle with the finances.

Keep us all posted what you go for. What are your thoughts ?

FM

Hi Funky

As i wouldnt be able to afford $200,000, none of that really applies to me - finance wise.

Maybe when ive moved up to your league in property, i can buy property for £100,000. Im in the starter league lol

I was looking at nice apartments with the pool and gym etc, for £40,000.

Thanks

Matt

matt looks a good website mate,al have to have a proper look tomorow

cheers

Great, i found this to be the best website for USA property, to rent and buy.

I know your probably well established already, but if you go for it, maybe you could advise me as you go, as this has been my plan for the last 6 months, i went to FL last year, and i wanted to buy there from then onwards lol

Thanks

Matt

Hi Matt,

O.i.c.

Well that sounds like a very reasonable price. Is that a 2 bed or 1 bed ?

Some more info you may find useful...

Properties outside the 15 min to Disney catchment area usually tail off in price dramatically (i.e. half in some areas if over 15 - 30 min drive to Disney). If the properties you are looking at are within this catchment area then you can expect have a reasonable chance of renting them out. If they are outside this area then you don't and you have to ask yourself the question "If I was going to go to Disney would I want 30 - 60 mins drive everyday or would I prefer more time in the Park ?" Obviously you don't want the extra drive. And nor does the average American. Don't forget your market place is 90% American tourism. So you have to "think American".

Anyhow, I'll have a look at that website when I get some time.

All the best with it.

P.S. Any idea what the selling costs are to the owner, as I didn't get an answer on this (I assume it's got to be about 4% too, same as closing costs ) ?

FM

Hi Funky

The mortgage broker did say something about selling costs, but to be honest, i cannot remember the figure, so if you say you think its around 4%, i will take that onboard unless i hear different then i will post it here.

I totally agree with what you said about driving etc, disney land is the biggest attraction there isnt it, even though theres lots of other things, but its mainly disney land.

On that site i gave you, i looked again last night and i saw my perfect starter, it was 1 bed in a co-op building, with a pool etc, for $40,000!!! Im looking small, as dont forget, this is me starting out, i dont want to go in over my head when im in England, and the property is in Florida.

And if that works out, maybe in 24 months i would have a few more like that over there, that goes for most of America, look at all the American states where people love to visit, house prices are good there, and after looking at America, it has rather put me off buying in the UK, as in the UK i worked out theres not really any monthly profit, and you dont get much for your money.

This probably works in alot of other countries too, i just have not looked into it at all, does anyone here have any property in cypress, spain etc? dubai?

Oh, and i think i got the answer to my original question lol, credit limit - if you have the deposit, and you get accepted for the mortgage, you can buy what you like pretty much, right?

Thanks mate

Matt

hi matt,funky

wow $40,000 its nowt isit?

the forecasts for price increases look very positive too!

does either of you two know what happens when theres a hurricane though? does your insurance cover you for lost rent?

Hi Matt, Chris

Matt : Yeah, I'm just guessing on the 4% selling costs.

The one you are looking at, are you going to go visit to check out the neighbourhood ?

Sorry about not answering the original question, just saw stuff developing about Florida and jumped in head first !

This should probably be in the Foreign thread by now ;-) Might be better to post the question there.

Chris : Insurance usually covers hurricane damage, not sure about lost rent - you probably have to get another policy for that. I'm not sure to be honest mate.

funky

just a quick question about a totally different subject

i'm in the process of arranging my first buy2let mortgage for bts

i was under the impression if you refurbished and sold on, you paid tax at your own normal rate but my mortagage advisor said its capital gains tax whether you sell straight on or not

any idea?

As far as i know, if you do not live in the property, you must pay capital gains tax.

In the co-op buildings, hurricanes may not damage the apartments, but you never know lol

I probably wouldnt spend £350 on plane tickets to see the neighbourhood, as i have friends in florida ide rahter pay $100 to to take lots of pictures of the local streets that i would have found on a map site. And you can do some local research on the internet about local crime rates, and everything you need to. You are right, its alot of cash to go and see it all the time, so i would do what i can from here.

And straight away, get a property management company to look after it.

Im just having to wait to save the 20%, well with the other charges, about 25%. So for me im saving, and its a waiting game.

Thanks

Matt

matt

have you had a look at the deal paul dawsey is offering on cyprus,looks pretty good although a tad opptomistic

Christopher,

Sorry for the delay, I've only just noticed your question in this "old" thread.

If you sell a buy to let property within 3 years, it is exempt from capital gains tax as far as I am aware. After 3 years you pay tax according to taper relief. I haven't been bored enough to read up on that yet !

Interestingly enough (yawns), <grin> you are also exempt from CGT as long as you were marketing it to sell the property within 3 years. Which obviously you need to have proof of and it needs to be at market value.

thanks funky, better late than never i suppose.lol

just waiting for my solicitor to get back from hols to get a completion date,now. then i'm raring to go.

I bought a book from taxcafe and it seems i might be better off paying cgt after all, then at least i'll get the first £8700 tax free. funny old game innit?

have you ventured into the american market then???

Me?

No, i cant find an investor, so im spending the next 2 months paying my debts off, then by christmas i will be ready to buy a property.

Matt

Christopher,

Re your completion, are you just buying something or just selling something (Cyprus perhaps) ? If so, what and where ?

If you are selling something I suppose you have had your property more that 3 years then ? Otherwise why pay CGT if you don't have to ???

I have a mate who just sold his BTL and pocketed the cash (within 3 years) and didn't pay the taxman a penny of it !

It didn't seem right at the time but he assured me it was all legit and legal. Anyway, now he has a Porsche Boxster out of it - Caarrrrr-Ching ! Not sure you'd be able to do that sort of Tax free dodge in the US of A. So it's the UK for me, at the moment. Also the foreign markets are all lead by mostly UK investors and if our economy slides then investment confidence will slip and foreign investment will probably be hit first, hence those markets may fail to produce the much hyped returns anticipated - or worse. I don't know enough about the tax situation either and as such I am stearing clear at the moment. Also I don't want the hassle and can't dedicate the necessary time to get the numbers of holiday makers in effectively enough. That's just me though, may work well for those that have and want to put the time in. I think I am a relatively lazy person, I'd prefer to spend time looking for new projects than trying to manage the ones that I have already. I'm a real believer in the more hands off the better. The only time I want to use my hands is to hold them out to collect the money !!!

For the record I think Cyprus and South Africa are probably some of the best places to invest at the moment.

Regards,

FM.

funky, no its my first and very long overdue bts

i think your mate must have said he has lived in the property to avoid any tax,,,from what i can make out you pay income tax at your normal rate on all profit for bts, but for cgt you get the first £8700 tax free then 40% on the rest.

so what you uo to at the minute?any projects on the go?

Come to think of it yes, he did live in all of them first. Then he moved out. let them for just under 3 yrs and then sold them. So that's the way. I still thought you could sell a buy to let within 3 years and pay no CGT on it though !?

Got one BTL house up and running about 1.5 years ago. I've just completed on an off plan flat which is let out now (almost!). - Potentially going to sell that soon ? I'm waiting on another flat (same development) which is awaiting planning permission on an appeal. (It's a penthouse, squeezed in the loft space but very huge, good price, good flippability (if that's really a word!) if it ever goes ahead!)

Looking at 2 more potential options next week but it's top secret, at the moment.

What you up to ?

Regards,

Funky

sorry guys for jumping in on the conversation but i am interested in your views on off-plan. as you may have noticed on this forum i have always stuck to my guns to buying tenanted property and staying clear of offplan.

part of my view is based on the fact offplan is often where the shark portfolio building companies play and that i find it difficult to evaluate the opportunities (as they are not built)and it seems hard to evaluate rents etc.

having said this, many guys i know have made lots of money in off-plan.

what do you think of investing in offplan in general and also in the current market?

tom

Where I am (Herts) I think that they are starting to get very expensive now due to mass marketing ! I'm sure I've got a couple of bargains (well definately one anyway - see above), as some are selling for 26k more that I bought my two bed for. Just for interest the one beds all rented out first before any two beds started to go ! (Hmmm...Interesting...)

Pro's : 5 or 10 percent deposit for a year or however long it takes to build gives you 100% growth for a year or so, with no wear and tear and no mortgage payments. Then you can either sell it on before you complete or hang on to it for a while till all the investors have sold on and then sell after a year or so when there isn't so much choice / haggling to be done.

Con's : Is it a bargain or not ? What is the market going to do ? Lots come on the market for sale and rent at the same time when they are all build, flooding the market. (Mine took about 6 weeks to get someone in - and yes I was starting to panic a bit !) Rental income might not be that high a yield.

Tips : Get in at the very very start - or near the very very end. At both times the developer will more than likely give you a bargain to satisfy his money lenders that he has reached certain milestones in terms of sales. The penthouse that I got (still no planning permission) was £265k originally - got it for £175k ! A similar development nearby they are listed at about £310k

That's about it as far as I can see.

Funky.

P.S. Anyone know where to get an 89% mortgage with hardly any fees ?

funky me,

thanks for this it was very helpful - i am not sure why i still seem to have a phobia for off-plan. perhaps it is because i can't actually seen and feel what i am buying.

i like your tip of either get in early or late to get the best deals. i think i am going to start to look into off-plan but very cautiously.

thanks again,

tom