I hope you’ve had a good week enjoying our second summer! This week I am going to tell you about options for when your experience is limited, as this is something we get lots of questions about. Covid has changed our offering in this regard too so it’s a good update on what is available in the market.
I’m going to answer some of our most common questions, but if there is anything you would like to know that I haven’t answered then let me know.
I don’t own any property and I’m looking to buy a buy to let, what are my options?
This is the most difficult one! I think the main consideration in this instance is what you are trying to achieve in the long term. If getting on the property ladder with a buy to let rather than a residential mortgage is the first step to starting your property portfolio then you need to appreciate that its not necessarily going to be the ideal option for your first case. Once you have owned this property for 12 months though, you will open up so many other options.
If you would be able to afford the mortgage as a residential mortgage, then we have a lender who would look at a buy to let for a straightforward single let property at a competitive rate. If this isn’t an option, then we do have another lender who would look at it on a 3-5 year term to allow you to get that first step into property. Rates are not going to be the cheapest so the rental yield needs to be worth it, but the lender is flexible with their affordability calculator and it is a short-term option. You would need a 30% deposit for this.
This lender will also allow you to purchase an HMO or freehold block of flats (MUFB) as a first-time buyer and investor. Again, the interest rate is not going to be the most competitive, but the yield you will get when you compare the property to a single let will be much greater. Again, you will need a 30% deposit and the property will need to be fully managed.
I own my residential property and I want to buy my first investment property; how can I start?
We have a number of options for a single let in this instance. Some lenders have a minimum income requirement so we can discuss this in more detail but we have got some competitive rates for personal and limited company mortgages, and there isn’t really much difference in rate between a first-time investor and someone with experience for single lets.
If you are looking at a small (up to 5 bedroom) HMOs then we have a good option at competitive rates up to 75% loan to value. You will be looking at a bricks and mortar valuation so be aware of that with your figures. For anything outside of that, so larger HMOs and MUFBs then we could offer the same as for a first-time buyer and investor. This would be at 70% loan to value and would need to be fully managed.
I want to borrow my deposit or the refurbishment costs for my first project, will that work?
In short, the lender needs to ensure that they have the right applicants on the application so you need to be bringing something to the deal. When you have experience then lenders are far more open to bringing in angel investors, but you need to bring the majority of funds or set up an JV so the person that is bringing them is on the application for your first property.
We have got some good options for all kinds of property and every level of experience. The important factor for you to consider is that an increased risk for the lender means a higher rate, so you may well need to compromise on your first property in order to achieve what you want to long term. There are some great property deals to be had, and if there is sufficient profit then an increased rate for the first few years shouldn’t stop you from buying it.
As always, give us a call if you want to chat through any enquiries you have.