Growing my small BTL business

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Great site! I’m a “small-time” landlord that owns a total of 3 properties – 2 rental flats and my own home – and I’m currently looking to grow my business further. Growing my small BTL business

I have one small problem: access to capital!

I currently have about 30k sitting in my own home, 10k sitting in one flat and 22k sitting in the other flat – total property portfolio is worth around £350k.

I’ve tried to remortgage to release equity but due to the market in Scotland being slow to improve, the numbers aren’t adding up and no equity can be released at this present time.

The question: is there a way of borrowing capital (with the sole intention to buy more properties) but using my current assets (equity & property) as a guarantee?

I see it as this: “Hi, I have 60k worth of equity and 350k worth of property, I’d like to borrow some money against what I’ve got to buy more BTL over the next 5-10 years, is this feasible?”

Any help, pointers and advice is more than welcome!

Thanks,

Fred

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Comments

  • Hi Fred

    Property investment is a marathon not a sprint.

    I know how frustrating it is when you just start to get going and then run out of money. It took me seven years to buy my second property!

    You are at the stage right know when you will be most vulnerable to the property sharks. These are people who will tell you that you can buy courses on how to grow your business and buy or control property assets with none of your own money. Examples include lease options, rent to rent, no money down financing, joint ventures and a whole lot more. They will tell you that if your follow their strategy that you can give up your day job. I have yet to find one person who started these courses within the last 5 years with no money and ended up being able to provide absolute proof of being successful. However, I have come across plenty who have a big credit card bill and no job as a result of taking such advice. I have also spoken to lots of people who have had to go into IVA’s or declare bankruptcy when it all goes horribly wrong.

    Please remember this, why don’t the the people who sell these courses simply focus their efforts on what they say made them so successful in the first place? They will tell you that they have a calling or a passion to teach people. Well if that really is the case they should do what I am doing and fund their entire business model on voluntary donations shouldn’t they?

    My advice is do more of what you did to buy your first two properties. It may take years but so be it. You might get lucky too and find that we enter a period of capital appreciation. History does tend to repeat itself and there are plenty of signs that we are coming out of a dead property market and that we are at the beginning of another boom period.

    You can read about how I got started and my journey to financial freedom here >>> http://www.property118.com/my-first-intentional-property-investment-part-1-2/29019/
    .
    Mark Alexander recently posted…The GOOD Landlords CampaignMy Profile


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  • Hi Fred

    Many people share your frustrations that you ‘see’ your own money in your (bricks and mortar) portfolio but the lenders won’t give you access to it.

    And of course, here’s why; if you could release all of your equity, you would end up with a 100% LTV (loan to value) mortgage and I can tell you straight away that no-one (Scotland or anywhere else in the UK) will secure a mortgage and lend 100% of the property value to you.

    If you had sufficient equity across your portfolio, you may have an opportunity to capital raise against more than one property to get the total amount you need.

    However, against EACH ‘BTL’ property, you can probably only get a 75-80% LTV mortgage (although there is one lender that will lend up to 85%LTV as at todays date).

    You may be able to get a higher LTV mortgage on your own main residence / home, although that will be based on your income, credit status etc.

    As I always say on Property118, you will absolutely benefit from taking advice re all aspects of your plans (ie tax, legal and financial etc) and for financial advice I strongly recommend that you speak with a ‘whole of market’ Broker.

    Howard


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  • I wouldn’t call this advice nor would I recommend you listen to it but one way of raising capital for deposits is to borrow the deposit for your next property on credit cards or a personal loan but you would need to ensure the profit from renting out the property cover the repayments on the money you have borrowed. This is very risky and a sure fire way of getting yourself in financial trouble if you don’t no what your doing, but if your dissaplinned  enough it does work for some people. But not for all so be careful!


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  • Sorry Rob, but I always shudder when people say “borrow money off credit cards for deposits”.

    It’s a very dangerous strategy taught by some property gurus.

    What they fail to tell you is that no lender would knowingly allow you to pay for a property deposit on a credit card.

    Therefore, you either have to go to a lender who does not ask the question of where the deposit is coming from (of which there are very few), or you have to “hide” the fact that your deposit is coming from credit cards which is tantamount to mortgage fraud!

    I would not advise anyone to pay for property deposits on their credit cards.  Even if you did get it past the lender, you would end up with 100% financing which is NOT recommended as very risky all round!

    We have a current discussion on Property Tribes about methods of buying property with very little money – when scrutinised intensely, most of the methods advocated by gurus simply don’t stand up.

    http://www.propertytribes.com/can-make-money-through-property-with-very-little-t-8674.html

    This thread makes for an interesting read.  We have another thread where LEGITIMATE ways of making money through property with little financial input are also discussed:

    http://www.propertytribes.com/can-make-money-property-dont-have-lot-start-t-8712.html

    I hope these threads help Fred make some informed choices of how to progress.


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  • Mark Alexander’s right. Better going nice and safely. A bit like building foundations. I used Personal Loans, Credit Cards and loads of overtime , 3 jobs for 1 year for my seed money! I worked 3 jobs at one time for a year then 2 jobs for a second year. In 5 years I’ve only managed to remortgage twice but got a decent income every month. Although I’d describe myself as super safe I almost blew it several times. Just get one at a time on the go with a really decent safety pot, at least 10% of each property’s value. I only have 11 properties but am pretty much retired at 46. I had no repairs for 2 years got overconfident and used my safety cash for another property. Next month I had 3 damp proof courses, a major roof repair and a couple of dodgy tenants not paying. Things can go bad overnight in this game! The only reason I didn’t go under was due to my letting agent paying my bills upfront and deducting £18k from the rents whilst I scraped an extra £1k a month from going back to work. Get safe first then get rich. Took me 5 years to retire with loads of overtime and loans but now my profit buys properties.


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