Landlord looking for Let to Buy advice

by Readers Question

3 years ago

Landlord looking for Let to Buy advice

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Landlord looking for Let to Buy advice

I’m new to the site and fairly new to property investment and with a wealth of knowledge and information on this excellent site I am looking for a bit of advice.

I have two properties (one that I live in and one on BTL) but I’m looking to purchase another within the next 24 months.

My plan is to move out of my current property once I have saved enough funds for a deposit, let it out and move into the new one. I’m just wondering if anybody has any better ideas about what to do or which direction is best to go into.

Property A is worth £82,000 with a £78,000 mortgage and rents at £450 PCM (bit of a turkey)!
Property B is worth around £118,000 with a mortgage of around £98,000 and would rent at around £550 PCM.

My personal finances are pretty good and I’m pretty confident of reaching my goal of £10,000 within the next 24 months to use as a deposit to purchase a further property.

Any advice would be greatly appreciated:-)

Dwaynelet

Comments

Neil Patterson

3 years ago

Hi Dwayne,

I would just like to confirm that any advice that takes into consideration your main residence as it should here is regulated by the FCA and can only formally be given by a suitably qualified, practicing and regulated IFA or mortgage broker.

If you need formal advice please see >> http://www.property118.com/member/?id=314

I am assuming property B is your main residence and you would move and rent this property out. The current loan to value of B is 83%. This would then make it difficult to remortgage onto a BTL product as there is only one lender that would consider 85% and you may struggle to fit criteria.

Your other option would be to ask your existing residential lender for permission to Let, but this is only given for a short period of time not on a permanent basis.

After seeking advice you may find it is better to stay in your current main residence, but this does depend on income and many other factors.

You should also remember to build in a cash reserve of 20-30% min for rainy day funds. Eg voids, boiler break downs, damage etc.

Dwayne Creighton

3 years ago

Hi Neil,

Thanks for your reply I appreciate the advice. Yes property B is my main residence and I would be looking to move out of this property, rent it, and purchase another (which would become my main residence).
This though would not happen until I have enough for a deposit, my goal being £10,000 within the next 24 months.
I assume that I would be allowed to produce the surpluss from my own money to bring the required LTV to 85%?
How long would my current lender grant permission to let? Is there a generic term or will this vary from different lenders?
How much rainy day fund should I be putting aside in my particular situation?
Sorry for so many questions.

Thanks
Dwayne

george anderson

3 years ago

Reply to the comment left by "Dwayne Creighton" at "10/02/2015 - 15:13":

hi could you tell me what bank lets you stay in property b

Hi , I would just like to ask Neil . When you stated above "you should build up a 20 % - 30% cash reserve " what is this % applied to ?

Neil Patterson

3 years ago

Reply to the comment left by "Dwayne Creighton" at "10/02/2015 - 15:13":

Hi Dwayne,

You should note my caution about LTV. It is more likely to be a maximum 75% ltv or 80% ltv, but you will need an IFA to do a full market search based on your information. You are correct that you will need to cover the shortfall.

Most lenders will consider allowing you to rent a property on the basis that it is not a permanent solution and it is on a case by case basis, so there are no rules.

The cash reserve comment is based on the amount you are investing, but it does depend on the amounts involved and how your risk is spread eg size of portfolio. The smaller the portfolio the greater the risk.

Dwayne Creighton

3 years ago

Thanks Neil for your advice,

I see what you mean about the LTV situation, I'll take it on board.
In the meantime I'll learn as much as I can from the wealth of information on the site and continue to 'pay myself first' in order to build up my cash for an inevitable future investment.

Thank you

Dwayne

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