how to buy our first development property??? please help :-)

[smithes]

hi



I’m 25 and work as a heating engineer (sole trader) and work full time, so me and my girlfriend are live with my parents and are looking to buy our own place, but are also looking to start a small property development company only turn round 2-3 houses a year.




BUT!!... We have a small amount of savings to buy are own place soon but want to buy a home to develop?



thanks

Is there any way of getting any help from the bank to buy a house to develop rather than to live in, and not put down a deposit? Maybe have it as a business loan if we put together a business proposition etc??





We are both very new to this so any help would be very very much appreciated

[cjonesguitar]

hi i recently brought my first flat to do up. i was very lucky as it seems to be quite a sort after area and also parking which is important. it's also close to schools shops uni etc. i got it on Jan 30th and it will all done apart from bathroom (whitch is usable) at the end of may. so took 4 months.

i then plan to talk to bank, mortgage adviser again to get second one. i also work full time as a teacher and found that working and doing it up was harder than i thought it would be but that’s fine. i also know good tradesman and used to be a decorator by trade. you just have to do it to be honest its the only way. but i found the being patiant and look for the right one.

[smithes]

thanks cjones

im sure its not easy but anything thats worth doing usally isnt. its good to know how long you can take to turn one round.

but my main question is how to finance my first one?? is it best to do it under our own name or under a property development company, in the respect as to fund it and to claim money back (as looking to carry on doing this!)

would a bank give a 100% buisness loan to buy a property to develop?? as needs all the saving to buy own our house.



thanks again :-)

[AshfieldFOCUS.com]

Hi,

From my research, a property company would be the way to go, BUT you are unlikely to get a mortgage as a company.

A commercial mortgage would require a 30% deposit whereas a BTL would require a 25% deposit. I am not sure but a BTL might also be cheaper. You really need to speak to a financial advisor regarding this. If you go to... Ashfield See how much you can afford on your mortgage - FOCUSPortals - AshfieldFOCUS.Com. you can calculate how much a mortgage is likely to cost, but you can also contact a WHOLE OF MARKET advisor.

When you decide what to do, I know you are looking for your own house, but if you can find the right property and are willing to wait a little longer for your own home, you can use your deposit to buy the re-development, then when that is done, sell, get your deposit out for your own home and use the profit from that for your next development.

Come to think about it, it might be worth you buying a house to do up, live there whilst doing it. There are at least 2 advantages to this...

1. As you live there, you will not be liable for capital gains tax when you sell.
2. You can get a higher loan to value (as you are buying it for you rather than a business), you won't need such a large deposit, which means you could probably use some of the saved money to do it up. As you are young and probably no children yet, then this is the way I would go. Buy property, live in, do it up, sell it. This will allow you to maximise profit as you can get higher LTV and no CGT.

(LTV = Loan To Value. CGT = Capital Gains Tax)

[smithes]

thanks ashfield.

thanks for the help, i'll look on that site as well and is very usefull.



thanks again

[cjonesguitar]

I brought the first one as my own home. Needed fully refubushing apart from windows. From what I understand it is cheaper to do as your own home as there is no tax etc to pay. I do keep receipts etc in case I need them.

I plan to buy the second one in a few months and am looking for something that needs a bit of tiding to rent out.

[AshfieldFOCUS.com]

If you are looking to rent, then for tax efficiency, move into the new one (that needs doing up) and rent your current one out. You can get a Let To Buy mortgage on that (if you have enough built up equity in it) to release funds for your second home.

Now, if you sell your first home within 7 years (i think it is 7 years), you have no CGT to pay on it (though speak to a financial adivisor / accountant) and because you are living in your second home, you will have no CGT to pay on that either.

[smithes]

thanks for all your help guys!

just one more question if we buy a house to do up and are still liveing at home with my parents, can i say i live there on paper and and still live at home because.

to save tax etc??

and if we did you development house before moving out ourselfs is there any advantages for doing it that way??


thanks again for all your help :-) :-)

[AshfieldFOCUS.com]

As far as I am aware, if you buy a house that is so run down you can't live in it, then start work on it, then move into it to finish the work, then it is still your home. Doing it the other way (live at home right up until you sell) is cheating the tax man. Living in it, you can prove that you have lived in it. Not living in can be more awkward to prove.