THE QUESTION

I'm viewing a house which has been split into two flats. I believe that the title has not been split. What are the rules for lending on a property like this? I am guessing I won't be able to use a standard BTL mortgage? Anything else I should be wary of for a property converted into two flats?

THE ANSWER

The first rule on any property divided into flats is to check with the local planners that permission to do this has been applied for and approved. Two reasons for this:

1. It is the first thing any lenders surveyor does.
2. If it has no PP it is unmortgageable with any lender as it is an illegal conversion.

There is an amazing number of these flat conversions that are done without PP, as the owner doesn’t think beyond 'Hey, I can get more rent if I can split it into flats.'

If you can establish it has been used as flats for a number of years you can apply to the council for retrospective PP.  Even more amazingly very few vendors actually do this; they just...

This is a little different to the usual questions I get asked, but quite interesting to consider.  The windfall could come from a number of sources - an inheritance, some good property deals or - as this questioner suggests winning it!

THE QUESTION

If you won £500,000, how would you invest it to maximise your monthly cash flow?

THE ANSWER

The answer you would normally get from mortgage brokers/advisers is to use your cash as 25% deposits, get 75% mortgages e.g. you could buy 5 x £400k properties, put down 5 x £100k deposits; you could of course buy more properties at cheaper prices.

Whilst this would no doubt generate multiple fees for your broker (surely not why they advise it?!) it is also a finite use of your resources. Once you had used up your cash on 5 or 20 properties that's it; granted you should have created a good income for yourself, but your capacity to continue buying is exhausted.

As an alternative you can consider buying one property at a time -...

When we are JVing, what paperwork/agreements do we need to produce/sign? Others have mentioned being a sophisticated investor or an individual of high net worth. How does that translate into any agreement? Do we simply have to state we are one or the other? And what are the definitions of each?  I think I need the new JV PS 13.3.

PS13/3 is the FCA placing restrictions on the marketing of unregulated investments to members of the public.  Basically it's to control people who they consider unable to be able to work out a good deal from a bad deal

This pretty much covers any investment where the investor stands to gain (or lose) money depending how the investment performs, but is not regulated by the FCA or sold through an FCA regulated financial adviser.

It certainly covers any property deal from selling off plan Caribbean hotel rooms (remember them) to a two-up two-down refurb.

Loans on a specified rate of interest, regardless of whether the project makes or loses money,...

With regards to getting a BTL mortgage, I have been told by people that I need to show that I have the deposit in my account for the last 3 months. My in laws are selling their house for £45k and we have agreed to put this money into property investment. So if my father-in-law put that money into my account, do I have to wait 3 months before I can get a BTL mortgage or have I been told wrong?

Understanding the lender's thinking guides you to the answer.

Your solicitor has the responsibility under Anti-Money Laundering laws to provide proof that your deposit is from a legitimate source but...

BTL mortgage lenders in particular want to determine that you have not borrowed the money and it is really your own cash you are using and you are not trying to disguise the fact you are borrowing from someone/where else.

To that end they often want to see an audit trail stretching back 12 months, not 3. If chunks of money have just dropped into your account within that time, they will...

Question

I have 3 ex-council flats in concrete blocks with no mortgage on them. I have tried to get a mortgage but cannot find a lender who will lend on them. I want to use the money locked in the flats to buy more property, can you teach me how bridging finance works and if that would be applicable to these flats?

Answer

Perhaps it might help if I gave you a few simple facts about bridging finance:

• • it is short term finance taken over a matter of months
  • it is used to buy properties at one price then to sell or refinance at a higher value, sometimes referred to as forced appreciation
  • the increase in value over a short time period is usually achieved by either buying below market value, refurbing to create a higher value, or sometimes a combination of both
  • it is asset based lending whereas, by contrast, mortgages are income based lending
  • it is quicker to arrange than mortgages, allowing you to negotiate to buy properties much more quickly, rather like the speed at which a...

have made an offer on a BMV property? (fingers crossed). I was hoping for a family member to buy for cash, renovate the property and then me and my business partner could buy it with a mortgage getting our cash back out. 

Our objective is to recycle as much of our cash as possible as quickly as possible.   We are hoping to purchase the property for 85K, spend 10K on refurb and have it revalued at 120K-130K. So our thoughts were if we bought it as a cash purchase in someone else’s name, then remortgage it in our names (personal not LTD) we wouldn’t have to wait 6 months to get our cash out. Does this sound do-able?

So your plan is to use your own cash but pass it to a family member to buy then get it back when they sold it to you, got it.

Two problems in making that strategy work

• 1. it is not what is known as an arm’s length transaction i.e. seller and buyer are known to each other and lenders don’t like that
  2. the lenders that won’t allow you to...

I often get opportunities offered like this:

I’ve got an Incredible BMV in West London – for a CASH BUYER ONLY. I’ve just got the valuation done via Home track and, guess what? Its worth £716,000!

The asking price is 495,000 for a quick sale and I could get it down to 450k, as it’s a very motivated seller who needs to sell asap. Do let me know immediately if interested.

This is from a property investor who – clearly – doesn’t actually have enough money in the bank to buy the property himself.

However, he is ignoring one very important fact … this property can be bought using bridging finance, possibly with a very small cash input, subject to a bit of due diligence:

On what do you base your value of £716,000?
Is it on the market with an agent and that is the asking price? Or is it just that Hometrack says that is what it is worth; would that be supported by a RICS survey report?

Assuming its...

“I am full time in property” is a pronouncement heard frequently at property meetings. My question is, are too many people in too much of a rush to get to this nirvana like state, without fully realising the adverse effect it has on their ability to raise mortgages? Would they not be better to slow down and take their time reaching that pivotal moment in their lives until the ability to raise Buy To Let mortgages in particular was much less relevant?

Being full time in property is one of the most commonly voiced goals in property circles. To be able to create enough passive income from property to be able to give up the day job and become a ‘full time property investor’. It is frequently taught and encouraged on property courses and at meetings. It is held up as the definitive status symbol, to be worn almost as a badge of honour. Speakers will spit out the term ‘wage slave’ as a form of derision almost.

There is undoubtedly great merit in finally...