Best option

S

SineWave

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Would love some feedback on best option with regard to getting finance;

Salary of 35k.

Take home approx 2600 pm

Mortgage of 60,000

property worth 280,000 (so 220k equity)

13 years left on mortgage

Montly mortgage repayments of 450

Savings of 30,000

Excellent banking/saving record

Considering purchase of property for c 500,000

Carrying out renovation work to the max value of c 100,000, over a 1 year period.

Potential resale of 750,000

What would be the best financial route to follow (or beg for); eg, interest only mortgage on new purchase, straight out loan, remortgage of present property?

All feedback appreciated.............
 
Sinewave
Why not buy and hold rather than flip?
Take equity out of increased valuation and buy another?......Although would it not be safer to not put eggs into the one property and rather buy 2 and hopefully spread risk?
Just think in the market flipping is more difficult than many think.
Probably bank may be less likely to finance if they know it is a flip.
Are you an experienced builder/tradesman?
If so bank may look more favourably?
 
Thanks markowitzman. The property we are considering purchasing would be a complete renovate.

We need to stay in present home because of young family and logistics.

Good relationship with bank as we done similar (trade background) some years ago, but our income was much higher.
 
SineWave said:
Good relationship with bank as we done similar (trade background) some years ago, but our income was much higher.
Click to expand...
What bank? Are you sure that their mortgage rates are competitive?
 
It was AIB, but any future discussion would not necessarily need to be with them. Just saying we've a good credit history.

I would love to hear more feedback along markowitzman's type line. Options to consider, and pitfalls and advantages of same.

Thanks....
 
Have you read this analysis of the pros and cons of getting an interest only mortgage to fund the purchase or renovation of an investment property?

What do you mean "straight out loan" as opposed to a mortgage on the investment and/or PPR properties?

Have you worked out what the total repayments (existing mortgage and interest only on the investment property) would be as a chunk of your monthly income? Borrowing an additional €600K sounds ambitious given the other figures that you have posted. How likely is it that the resale value after renovation of €750K will be achieved? €750K resale would be less than €80K profit after CGT and other expenses (solicitor's fees, auctioneer's fees etc.) in case that helps clarify if the costs and risks are worth the potential benefits.

Have you carefully crunched the numbers (conservative estimates where the exact figures are not known a priori) to ensure that the venture is viable and prudent? Have you considered all other investment options/alternatives before deciding that property is the most appropriate strategy for your circumstances? Have you factored in the tax and other issues involved?
 
Thanks for the reply ClubMan. I have been considering all the options as posted.

Relating to a "straight out loan"; what I done before was got a mortgage on the property (was PPR at time) and agreed a facility for a further loan of 60k to upgrade (I always work on high contingencey estimate), but only drew 37k, as that was all that was eventually needed. Got best solicitor rate and sold privately.

Based on the 80k'ish you mention, I don't feel it would be a bad (possible) return, over a year (hopefully 8 months)?
 
key question is can you afford to carry it if it does not sell?
This is why I feel you should renovate to let it out.
Lower spec needed (hence lower renovation budget) as you are not trying to wow a potential buyer.
Functional kit out and get a tenant below market rent on 12 month lease.
Once tenant in and bank pleased ask them for finance to do it again.
Easier and less risky than flip in this market. Looking at the stock market tech bubble of 2000 it seems everyone had a "friend working for crapstock.com"!! and that it was a screaming buy. Now it seems flipping property seems to be the new bubble imho. With your trade experience you could make a lot of money with a lot less risk if you renovate and hold properties to let rather than putting your head on the line for a flip. As the market gets hotter one could end up with egg on face. Agree potential return in the short term is higher but so is potential risk. Settle for lower returns but lower risk in view of your monthly income at this time. In the future as you build up a portfolio then you can take more risk I feel. Please feel free to argue this point out Sinewave as this may not be best advice for you.
 
Good feedback, but the reason for a property of this value is that it is an extremely well established premium area, and the property is presented and advertised very badly. Buyers in this area, are the type that want a "hang your hat" type property.

Along with that, it is an area with a low supply of available properties and is also (i think!) less likely to suffer due to a market dip.

So all in all, higher value but less potential risk.
 
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