Newbie Investor would like to pick your brains

Potential Property Owner Develop. Good idea but you will need to do your homework before dipping your toe into the property market. It is really important to clarify what it is you are looking to do. This could include whether you wish to purchase a property and sell for a profit or to hold it for a regular income. Will you just be focusing on developing your own properties or set up a business that offers services to others?. If funding is an issue then you need to make sure that your figures stack up before you buy a property. I would certainly not purchase a van until you are sure that this is the type of work that you will enjoy. Developing property can be just as stressful as working for someone else if not more so if things do not go as planned. Consider going in partnership with individuals for your first venture and possibly sell the property after development and so you get some additional capital to go on your own. If you do not own a property at present then you could purchase on a residential mortgage. Bridging loans are available as are development loans but would caution against using unless you get a property well below market price.

Thanks for the response bibi. I have been doing and will continue to be doing my homework on local property values and then hopefully get a good deal on a property, but where I struggle is on the funding side, how much I should aim to put into a property and then having the confidence to then apply, all my savings to this.

My long term plan is to buy, renovate and then hold on to my properties as a means of regular income, but I could see my self buying and then selling my first property to hopefully bank a little extra capital, and work out just how much I spent and where.

I do understand what you are saying about the van but the initial cost of the van will be offsetting the labour costs which I would have to pay for if i was not able to carry out the work myself,as I would greatly struggle trying to carry out a refurb with out the means of transport for me, my tools and the materials. I also think that it's good to have a little money tied up in a vehicle because if things did go badly throughout the finance of the renovation I would know that I could always sell the van and use that money to get me out of trouble. Also I am pretty confident that I will enjoy the work as its not a million miles away from what iv done everyday since leaving school, which is my carpentry and joinery and general building work, obviously I will have to deal with other trades on a occasions but as these will again be friends and family members I really shouldn't endure to much hassle there.

Thanks for the info on residential mortgages I am currently just looking into this and weighing up the pros and cons.

I am also hoping that I could maybe go into a partnership on the first property just so that I don't get to tied up in the funding and concentrate on finding a good property and refurbish it to a really good standard, also meaning that if I went into partnership the property would be payed for in cash meaning we can do it as cheaply as possible and then hope to make a decent capital from this.

Thanks for your input, give me some points to have a good think about,

Mr Townsend

Hello Mr Townsend.
I've been a Landlord for about 5 years now and currently own 4 properties.
I also started out with a residential mortgage on my first property, and in fact lenders will NOT lend to you on a buy to let basis unless you already have a residential mortgage. Some even say you need to have 12 months satisfactory payments on a residential mortgage.
I would totally advise against bridging finance though, as there are many companies out there who will rip you off, and it is expensive even with the most scrupulous companies. They can charge interest of up to 1.5% a MONTH, equating to 18% a year on the value of the loan. Considering a mortgage is usually around 5% a year, it means basically paying almost 4 times as much.
The rental market is strong at the moment and in demand, but whatever you do, DO NOT rent to DSS. Many Landlords stopped renting to them a while back. They never pay the rent and the LHA cry foul if you even go near them to ask for the rent, and it always ends in tears for the Landlord unfortunately.
Always make sure you get references and RGI is also strongly recommended.
You could very easily buy cheap, do up and sell, but be aware many lenders will not lend on a property owned for less than 6 months, so it will be very difficult to sell during the first 6 months you own the property. Also, don't forget you will have to pay an Early Repayment Charge to your lender to clear the mortgage.
As for buying a van, perhaps buy something small and cheap to begin with until you get going properly. Be aware though, that if you already have insurance on a car you will have to insure it as a second vehicle, and your No Claims Discount will not be valid. Also Van Insurance is more expensive than Car Insurance anyway, and given your age it won't come cheap unfortunately. It may even be cheaper to hire a van when required.
I wouldn't bother with loft conversions personally. Be aware you will need planning permission if you did this, and they don't add value to the property, or indeed make it any more attractive to the rental market. One tenant I had actually did a loft conversion for me as a favour mainly because he wanted the extra room for his children to sleep in. It was a disaster and now needs knocking down as it was badly built, is unsafe and was also done without planning permission. Luckily he hadn't used it as a bedroom, otherwise I can only imagine the trouble I would be in. I would add, this was on a property that already had 3 bedrooms, as it was a 3 bed semi detached. It is now a 3 and a half bedroom wreck. :-0

It IS possible to get a BTL mortgage without having a residential one first, but your pool of lenders is pretty limited. What will be more of an obstacle is the absence of a regular income from sources other than property; most BTL lenders require a borrower to have earnings of £25Kpa, and they normally prefer you to be employed but will accept 3 years' accounts from a self-employed person. Most lenders also won't lend on a purchase price of less than £40K.

Anthony is being a bit harsh on DSS tenants - yes, taking them on can be risky (and a lot of lenders/insurers don't like them either), but it's unfair to tar them all with the same brush; they're not ALL wasters who'll spend the rent on fags & booze! If you can find good ones then they're likely to stay for a long time because so many landlords are reluctant to house them. Aki and Arsh Ellahi at DSSMove are very pro-DSS and will be able to give you lots of advice on that market if it's of interest to you.

You don't necessarily need planning permission for a loft conversion (PP isn't needed if your plan falls within the permitted development limits) but you do need to meet building regs... but as you've been in the trade for a while, you're probably well aware of that. Research the difference in rent between a 2-bedroom and a 3-bedroom house in the area you're looking at; it may only be £30 a month, in which case that third bedroom would take an awful long time to pay for itself! On the other hand, though, a family in a 3-bed house may stay for longer than a couple in a 2-bed, so voids might be less of an issue.

Take the family members help, you split the risk and the reward, your only young and this is the first time into developing. There will be time to make more money on later projects, learn the business.
I would move into house and sell on as your own property as you will not pay CGT tax on profits.
Use what profit you make to invest in another property of your own. if you have overspent your budget and made no profit be thankfull you took a partner!!
If you make any money from the first one see if the family member will reinvest and buy 2 properties, it should with a fair wind only take you 3 months to get to this stage if you can sell the 1st one.........
If your 22 and cannot work for others you have plenty of time ahead of you, interest rates are historically low and look set to remain stagnant for at least 4 years you could have 5 properties by the end of that time, so long as you live on air!
good luck.
Dont buy a van straight out, buy an £1000 estate so you can get onto the local tip.
you will need the extra money you save on your core business of developing not driving!

i have 6 propertys and have so much money tyed up in them that asked if i would do it again NO the pay back is roughly 10 years as the morages are interest only . so dont bother inless you hit the lotto and gamble half as you be skint in a year or so