Let's Build Some Wealth! ??

This week I want to share with you all how some of our clients have built significant property portfolios.

The motivations for buying additional property are varied. Some clients want one or two to supplement retirement income. Others want to give up their day job and replace it with income from property, and some want to obtain amounts that would make your eyes water.

Then there is everything in between.

Like with anything in life, there are the standard operating procedures which serve us to a degree. Then there are the other ways which no one really teaches us, unless you know someone who has done it before and is happy to share information or you have a specialist broker like us that wants you to benefit from all that is out there.

It's not for everyone and many of us will have to get over our preconceived ideas and the conditioning that society has engrained in us... but for those with an open mind and a desire to have more, here you are.

So, how do our clients that build property portfolios into the tens and hundreds do it, without having either generational wealth behind them or a big pot of cash? The answer is two-fold...

They buy at discount, add some value and refinance, then go again. Yes, but how do they actually do this and where do they find the properties? I can never seem to find these when searching on Rightmove??

That’s because they aren’t buying from searching on Rightmove. They are buying off market and generally using a Professional Sourcing Company to help them. Let me explain further...

We do business with a number of Professional Sourcing Companies. They have a track record of finding genuine below market value properties, from sellers who are motivated to sell quickly and at discount.

There are several reasons why someone needs to sell quickly. Here are a few reasons:

Divorce, family bereavement, emigration, financial overcommitted, relocation, the list goes on.

The sourcing company generally get discounts of 10%-20% from the market value. Often these properties need a tidy up or refurbishment to maximise their potential. So the gain is two-fold, first in the discount and second by adding value.

But I don’t have ￡100k–￡200k lying around to buy quickly and refurb that property. You don’t need to!

Mortgages for Buy To Let investment are fine when buying for speed isn’t essential, the property is in a decent state of repair and you don’t need to tap into the discount for part of your deposit.

Hang on, what’s that last bit about the discount being part of my deposit?

And that brings me onto the second part as to how clients that build big portfolios do it....

They leverage creative finance.

Whereas mortgages can be used up to typically 75% against the lower of the purchase price or valuation, creative finance (more commonly known as bridging finance) can lend against the higher of either the purchase price or valuation. This is the clever part!

Depending where you are in the UK, it is possible to borrow up to 85% of the open market value. If you are obtaining a property with a 15% discount to market value then BINGO!?You don’t need a deposit!

This sounds too good to be true. Well...?it is possible. What you do need to bear in mind is that any interest and fees charged come off the loan and you still need to pay for the valuation, legal fees and stamp duty. If the property needs a light refurbishment, then this would need to be paid for, unless you have an arrangement with your builder or utilise other means.

Clients that do this regularly make sure that the end value after tidying up the property is sufficient to re-mortgage at 75% and pay back the bridging finance. Often there is a surplus to clear refurb monies spent too.

You don’t need to wait 6 months to refinance either. That is a common misconception. Experience with bridging isn’t essential and you can open a limited company today to purchase the property in and lend straight away.

If this is a new area to you and sounds overwhelming, don’t worry!?We have been at this a long time. There are lots of lenders out there that match different circumstances. And because we are a regulated broker, we can arrange the bridging finance and the re-mortgage if your plan is to hold the property. If you wish to renovate and sell on, that’s fine too as we work with clients for this strategy also!

Finally, before your ego tells you that bridging finance is a rip off and the rates are expensive, remember that although interest rates are higher than mortgages, if the numbers work, the numbers work.

There are a number of us at Express Mortgages with expertise in this area. If you have a desire to see more progress in your financial life and want to speak with an expert,?get in touch?and let’s chat to explore your options.

Thanks for reading!

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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