Develop with Cash or Mortgage (Stress test)?
Hi all. I have developed property in the past and want to return to the profession as my full-time job. I am stuck on whether to sell my current BTL and start developing small with zero debt OR raise as much money as I can ie. mortgage myself up to the eyeballs = stress.
Personally, I prefer no debt no stress and to try my luck with the money I have. I also know lending is cheap currently, so I should take advantage, plus it would make good business sense to keep the BTL for the long term.
My target in property development is to grow slowly but make c.£50k YoY.
Comments welcome.
Lee
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Russian Speaking UK Landlord Tax Planning Consultant
Member Since February 2015 - Comments: 29
4:32 PM, 15th January 2021, About 5 years ago
Most people including me buy the site with cash or very cheap debt and then maybe borrow the development costs
It’s very expensive to finance the whole lot : which is 15%pa once you factor in 2% set up both sets of legals surveys etc etc
Eats into profit especially when it’s hard to find sites that stack anyway. If you can pay 15%and still make 50k not so bad and after a few use your own money
Member Since October 2016 - Comments: 55
8:29 PM, 17th January 2021, About 5 years ago
Borrow to the max in fiat currency (GBP), as (1) interest rates are at multi-century lows and (2) inflation will remove your debt over time. This will be expedited where the Bank of England print money (like now). Granted the environment is currently deflationary but this will change quite fast, we are being told due to govt largesse going forward. Austerity is dead.
Save money in deflationary currencies like precious metals, bitcoin, commodities. Why save money in printed GBP paper? That would be bonkers.
If you can do the moneysavingexpert thing and shift 0% debt around different cards, go for it.
I might add you can save money in gold (Paxg) or bitcoin on a platform like Nexo and then lend against 50% of it, without credit checks. Now this is leverage.