Property Mentor Investment Questions

The following question was recently submitted to our property experts by an individual looking for advice on how to deal with their property let. If you have got a question regarding your tenancy/property, contact us now via the link to the right.

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Q: How to Finance Property Development

I want to finance my first property development - how do i go about it?

From Robert Garmet | Cardiff | 02/06/2010 | Landlord

A: Compared to buying to a property normally - where you need to put down a deposit of up to 40% etc - purchasing your first buy to let property development doesn't have to be as financially draining as it looks, especially if you have got access to the right investment strategies.

Just remember to bear the following in mind:

  1. Unlike traditional mortgages where the size of your loan is based on a mutilple of 3-3.5 times the size of your main salary. To access a buy to let loan, all you need is for your property to produce 125% of its mortgage payments in rent.

  2. Negotiate a good discount, and it is possible to let your property pay for itself. Take this scenario for example, you manage to negotiate a 24% off a property with a LTV of 75%. This negotiated discount can cover 24% of the 25% deposit you need, essentially enabling you to invest Low Deposit Down.

    To ensure you get the best deal, I recommend working with a finance team of brokers, IFA's and negotiators who can help you to harness the best deal.

  3. If at this stage you have negotiated well, the only costs you should be left with is your legal fees which on average cost over 1,000 pounds. Now if you are struggling to cover your legal fees, it is important to remember that unlike your home, your property development can reimburse you...

    The fascinating thing about buy to let is your tenant will pay for it all: the properties mortgage, council tax, bills etc, as well as give you a profit from their rents. The key whilst you are researching potential property developments is to make sure that your property development can produce at least 300 pounds in positive cash flows once its mortgage has been deducted from its rent. From these rents your can quickly recoup this cost within a couple of months.

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Image of Matthew Lauchlan Matthew Lauchlan, Property Mentor Director

I have been investing since 1984, and from the good of the 1980's to the lows of the 1990's, I thought I had seen it all, but the course proved otherwise. I first heard about it from a group of friends. They had been on the course the year before... Read more

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