Starting Your Property Portfolio

You’ve got a real penchant for home improvement. You’ve just completed a complete renovation of your own home and are inspired to take on more.

Having checked out the estate agents, you’re now checking the property auction lists in your area or the area you want to purchase a buy-to-let property. How will you finance buying a property at auction?

If you’ve been bitten by the recent ‘bug’ to buy, renovate, rent or sell-on keep reading.

Property development

Everyone has wanted to get in on this band wagon over the last ten years or so but there are a few things you should consider before making the jump. This applies especially if you haven’t done this commercially before.

The location

  • Consider the location carefully; the best location for the rental market won’t necessarily be the same as the ‘best area’
  • Check what the going rate for rents in the area is
  • Also check resale values
  • Check out who lives there already i.e. young professionals, young families, students

The property

  • Pay a good price i.e. as low as you can. Look for sellers who are eager to sell for a variety of reasons. Estate agents usually have background knowledge
  • Buy at auction but decide how much you want to pay for a certain property before the auction starts. Don’t go over your set budget
  • Make your first bid when the auctioneer calls ‘Going twice’
  • If the property doesn’t reach its reserve price, see if you can negotiate with the seller afterwards

Financing your property

  • You can organise a ‘buy-to-let’ mortgage but you will need a higher deposit usually 15 – 20%. It also takes time
  • If you are buying at auction, you will need to fund the purchase until a mortgage company will approve their loan
  • You may need to raise enough finance to cover refurbishments too
  • Organising bridging finance is fast and will probably be your best option

The renovation

  • The renovation project depends on the state of the property
  • Make good the infrastructure i.e. walls, plaster, floors etc
  • Electricity, gas and water systems should be checked and renewed if necessary as you will need safety certificates to rent or sell-on
  • Identify your target audience for renting taking into account the area and then fit out accordingly i.e. you should not invest in top end fixtures and fittings if you cannot recoup the investment
  • Make sure the finish is good; this applies for the rental market as well as for re-sale

Estimating costs and timings

  • If you are covering your renovation with a bridging loan you will need to estimate the cost and the time you need
  • Consider whether you do all of the work or if you will employ contractors
  • Make sure someone project manages the renovation so everything and everyone is kept on track

Bridging finance

Talk to a broker who can arrange the best bridging finance for you. You will need some security probably your own home as most lenders are prepared to take a first, second or third charge on your property for security purposes

Your bridging finance will be arranged for a short period usually up to 12 months. The longer you take the finance for the more interest you pay.

Good luck!

By Rob Rudd

Rob Rudd has been a proud home owner since 1997 and knows a bit about buying houses to renovate and let. He writes regularly for several real estate websites.

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