Glasgow Landlord Lacking Direction – HELP!

by Readers Question

4 years ago

Glasgow Landlord Lacking Direction – HELP!

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Glasgow Landlord Lacking Direction – HELP!

I’m hoping some of you experienced property people could offer me some advice as I seem to be lacking direction. I have 3 rental properties in and around Glasgow and I’m not sure what to do next. Lacking Direction

Property 1 is valued at around £75,000. The interest only mortgage (6 years left to run) is for £38,500 and is on a tracker at 1.25% monthly interest payment is £40 currently let to good long-term tenants at £450pcm. No early redemption restrictions. Lender is Woolwich – owned it since 1997.

Property 2 is valued at around £100,000. The interest only mortgage (18 years left to run) is for £57,500 at 5.74% light refurbishment mortgage, early redemption period ends this week so free to re-mortgage. Monthly interest payments is £274 currently let to good long-term tenants at £550pcm. Lender is TMW – owned it since Dec 2012.

Property 3 is valued at around £80,000 interest only mortgage (18 years left to run) is for £55,500 rate of 4.29% fixed until Aug 2016 with £3k early redemption penalty. Monthly interest payment is £194 currently let to good long-term tenants at £550 pcm. Lender is TMW – owned it since July 2012.

My circumstances are; aged 45, no dependants and living in my father’s property – so can’t raise any finance on it but will never be homeless! I currently have no other source of income except rent from above properties. I would find it difficult to work full time for an employer due to caring responsibilities. Just successfully completed a law degree.

Although I currently have enough to live on – just, I would like to turn what I have into a business to enable me to live comfortably. Would also like to buy my own property to live in but told I can’t get a residential mortgage without another source of income.

Sorry for being long-winded but basically I want to know what to do next?

Should I sell or re-mortgage and buy some run-down property to refurbish and sell on (but limited by how much could raise re-mortgaging, could I make up shortfall with bridging finance?). Or re-mortgage and get some more deposits for BTL’s (but soon run out of capital for more).

Sure it’s a common problem for experienced property people but it’s a new one for me so any advice gratefully accepted.

Thanks

Carolyn



Comments

Mark Alexander

4 years ago

Hi Carloyn

My dilemma here is that your current deals are so good and that you are so reliant on the cashflow your properties generate. If you were to remortgage, even like for like, you wouldn't get anywhere near as good a deal now and you cashflow would obviously take a hit as a result of that.

My initial thoughts were that Equity Finance would be the ideal solution for somebody in your position because you could retain your existing mortgage deals and extra funding would have zero impact on your cashflow for the next 10 years. However, Equity Finance isn't currently available in Scotland. I suspect it will be eventually but I have no idea when. If your properties were in England or Wales this is what I'd be suggesting you look into >>> http://www.property118.com/equity-finance-for-buy-to-let-landlords/44713/

Without more detail about how you might replace your income I'm sadly at a loss at the moment. I could suggest you consider a strategy of buying to renovate and sell property but I have no idea whether that would be suited to your skill-sets and other circumstances.
.

Colin Dartnell

4 years ago

Hi Mark,
This is for Carolyn, but I wanted your input.

These have a couple of if’s, but RBS offer Buy to Let mortgages fixed for 2 years at 2.99% with £1995 fees which can be added to the loan. Borrow up to 75%.

Now the if’s.
If they allow re-mortgages not just purchases, and if they will lend to someone without an income other than rental.

Below suggested borrowing all at 75%
Property 1. borrow £56,250 monthly payment £97, gain £17,750
Property 2. borrow £75,000, monthly payments £190, gain £17,500
Property 3. borrow £60,000, monthly payments £152, gain £1,500 (includes paying early redemption)

Without doing anything else this gives an extra income of £69 a month (existing payments £508, new payments £439) and have £36,750 extra in the bank to buy something new.

Mark Alexander

4 years ago

Reply to the comment left by "Colin Dartnell" at "01/11/2014 - 14:24":

Hi Colin

As I am no longer a practising financial adviser so it would be wrong for me to comment on this, especially in isolation of all the facts regarding Carolyn's finances, her situation, her attitudes to risk and all products available to her.

My advice to Carolyn would be to take advice for a fully qualified, practising financial adviser who is a landlord and works with several other landlords. If she searches our member section for Mark Edwards and Howard Reuben, these are two people who meet this criteria, both of which I highly commend.
.

Carolyn Barton

4 years ago

Thank you for taking the time to reply Colin. The suggestions you make are worth investigating and I will do so on Monday. I had a broker do another check with TMW yesterday and they have a btl product which has no early redemption penalty - the interest is higher but it may give more flexibility to allow me to buy, refurb and sell on with enough profit for more deposits. I will check this and your suggestions and see how the sums add up. Thanks again I'm not as stuck as I thought I was it would seem.

Carolyn Barton

4 years ago

Reply to the comment left by "Mark Alexander" at "27/10/2014 - 10:06":

Hi Mark

Thanks for posting this and for your input. I'm not entirely dependent on the cash from the properties I have some bits and pieces of self employment I do - just not enough for a bank to give me a residential mortgage for my own home at the moment. I am definitely interested in the refurbishment route and have some experience in that area.

When I wrote my initial query last week I was under the impression that a btl would be unsuitable for a refurbishment project as I'd been told by another broker that all had high early redemption penalties and that I would have to go bridging finance route - which as you know is terrifyingly expensive. However having tried another broker I find this is not the case so things are looking a bit brighter.

Many thanks for your help
Carolyn

ray selley

4 years ago

Hi Carolyn
I would ask your broker to check again regarding TMW early redemption penalties As far as i am aware there is no such product..Penalties vary according to product between 3% and 5%

Carolyn Barton

4 years ago

Reply to the comment left by "ray selley" at "01/11/2014 - 19:56":

Hi Ray

That is worrying as we discussed at length my requirement for no early redemption penalty. I will most certainly look to them to clarify this on Monday. I don't have my notes of the discussion to hand but from what I remember they recommended TMW lifetime variable 4.99% £995 arrangement and no early exit penalty. Thank you for alerting me to this.

Carolyn

Mark Alexander

4 years ago

Reply to the comment left by "Carolyn Barton" at "01/11/2014 - 21:01":

There are several other lenders operating in this field, check out the member profile for Howard Reuben. Precise, Interbay, Shawbrook and Aldermore are a few more that spring to mind. TMW seems to have a larger market share though and do have a product with no ERC's
.

ray selley

4 years ago

Hi MarK
I beg to differ .The only TMW variable product currently marketed has an early repayment charge of 3% until 30.06 2015.TMW do not require a minimum earned income as a vast majority of other lenders do unless its your first BTL. so TMW should be the first choice in Carolyn's circumstances

Ps I am a TMW borrower and and ex broker.My information comes from a family member who is a FCA approved broker

Mark Alexander

4 years ago

Reply to the comment left by "ray selley" at "01/11/2014 - 22:04":

You may well be right Ray, a quick search of TMW's website appears to confirm this. However, I am also a retired broker, founder member of the NACFB and founder of The Money Centre (UK) Plc. but having been out of broking now since 2009 I don't pay close attention to products these days and leave such matter to my own broker.

I am also a TMW borrower by the way, as is my brother and I know that he recently arranged a mortgage with TMW without ERC's. However, as you will be aware from your former broking days, the market can move very quickly and lenders often have exclusive and semi-exclusive products only accessible to certain brokers. I have no way to research such deals these days but my broker does of course, as does my business partner and co-founder of Property118 (Neil Patterson).
.

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