Mini e-course Part 5 – Property investment finance

This is the fifth part of our free e-course, if you missed the fourth part or need a refresher click on the following link - forming a property investment power team!

Sure your broker will help with the mortgage side but how about when the mortgage lender will only provide say 70% of the purchase price…Well there are a number of ways you can obtain the additional 30% finance. Some methods which our investors have used in the past have been:

1) Credit cards

There are many credit card providers who will allow 0% interest on balance transfers and purchase, so you can look down this route or maybe you already have credit cards and may be able to negotiate a deal with your current provider.

Please NOTE that this method is not recommended if you cannot afford the repayments or indeed do not have a plan of repayment within a specified timescale. You can easily have your fingers burnt here if you’re not careful.

2) Syndicate

Form a small syndicate of say 3-5 people who all are willing to put a small amount of money in for a return in say 12 months or so. You will have to really think through what you can offer in return for their money.

BIP have previously offered up to 2% per month and when we remortgaged having added value to the property we pulled out enough to pay the syndicate off with their interest. Do bear in mind typically you are looking at remortgaging in six months.

3) Family / Friends

Why not invest jointly with different family members and share the risk. You may have to knock up a partnership agreement between the parties. BIP have previously invested with two other people and so long as you have a great understanding you all contribute and make a healthy profit.

4) Personal Loan

If you could justify that a personal loan is viable then certainly an option. For example if you were to buy a property for say £150,000, the lender may lend you £112,500 (75% of the market value), so you need £37,500 to complete on the property.

If you take a loan of £37,500 say over 7 years your monthly repayment will be in the region of £550 subject to interest rates of course (assuming a rate of over 6% here). Your mortgage payment on £112,500 may be £420 approximately (assuming 4.5% buy to let mortgage). Hence your total outgoing per calendar month are £970, however should your property bring a rental figure of £1250 per calendar month then you are in positive cash flow and benefiting from capital growth also!

You will really need to scrutinise the figures here and assess your risk prior to taking this option.

5) Remortgage

This is a popular method of raising finance subject to you being able to cope with the increase in monthly payments. If you can release a small proportion of the equity from you home, you can buy a few investment properties with very little money in.

For further ideas why not see our article investment property financing that tells you 9 great ways to raise investment finance using creative thinking!

Mini e-course Part 6 talks about an area many property investors dread! - Tenant management!

Share |