The Let to Buy Strategy 🤓

How do you accelerate acquiring more properties?

A question I get asked a fair bit.

Previously we have talked about utilising bridging finance to purchase properties in need of refurbishment and BMV (below market value) types. But what if you just want to pick up a few more properties that are already mortgageable?

A great strategy, which I started with is known as Let To Buy. It's similar to BTL (Buy to Let) but with less deposits required.

Let me explain...

Let’s say you live in a property worth £300,000 and your current mortgage is £100,000.

It isn’t somewhere you’re looking to stay long term, as you could do with more space. 

You can increase the borrowings on this up to 75% Loan To Value (£225,000) and take out £125,000.

Assuming you fit the income requirements, you could then look for a property at say £500,000 and put down just 10% deposit (not the usual 25% needed for a Buy To Let).

Let's say there's a property worth around £550,000 in its current state but you have negotiated well and bought the property at £500,000 because it's a little tired but still mortgageable...

(Remember, you have £125,000 to play with)

So - £50,000 has gone on the deposit (10%) and you spend a further £50,000 on the refurb to modernise it. Most of the other £25,000 you have goes towards legal fees and stamp duty etc.

Because you bought well and added value, the new property is now worth £650,000 (as an example) and you can take a further advance of up to 85% LTV depending on the lender (releasing a further £102,500 on top of your existing £450,000 mortgage).

If you really want to accelerate things or a further advance isn’t possible, then a homeowner loan or second charge means you could increase your borrowings up to 100% LTV or take out £200,000!

Let's assume you stay with the further advance and release a further £102,500.

In certain regions of the UK you can purchase three BTL's for £100k each, putting down 25% on each (£25k x 3 = £75k). The rest of money can cover legal fees and stamp duty etc.

You now own 5 properties worth a total of £1.25m with mortgages totalling £1,002,500 (equity of £247,500).

So, by utilising the Let To Buy strategy, your equity in property has gone up from £150,000 to £247,500 in this example and you have 4 properties receiving rental income on them giving you an additional monthly income. This could easily give you additional cash flow of £1,000 a month!

On top of this, over the years you receive growth on a property portfolio of £1.25m instead of one home worth £300,000.

Let To Buy isn’t for everyone but for those who embrace it, buy right and add value, not only do you gain from capital growth but an increase in income as well.

Before jumping into this, it's important you speak with an advisor who knows what they’re doing and a good Property Accountant to understand any tax implications.

Fortunately we know both.

So, reach out to our team here and let's see what your options are. Who knows... This could be the start of something pretty exciting for you!

Steve

Express Mortgages is a trade name of Express Mortgage Services Ltd. Express Mortgage Services Ltd is authorised and regulated by the Financial Conduct Authority. [Reg No: 474427] Company registered in England & Wales no. 05167662

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