Let’s look at how this works in practice using a typical local example purchase price of £60,000. Let’s say a mortgage is obtained at 75% which is £45,000.

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You would then need to invest £15,000 as a deposit, let’s allow £5,000 to cover purchase costs and another £5,000 for the refurbishment so that the initial investment is £25,000.

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Let’s say the new value of the property is £94,000 and the re-negotiated mortgage is still at 75% which is £70,500 leaving you with equity of £23,500.

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Once you have paid off your original mortgage you will be left with £25,500 (£70,500 less £45,000) that you can use to invest in another property. In addition you will still receive a rental income from the property.

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A Standard Refurbishment Could Be: 

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• New kitchen

• New bathroom

• Redecorate throughout

• New floor coverings

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Many Standard Buy to Let lenders will want you to wait six months after purchase before refinancing, but not all lenders enforce this. We have access to lenders who will allow you to refinance sooner. 

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Beware though, that if house prices begin to drop you could be caught in a situation where you have bought a property, made a further investment to refurbish it and now cannot refinance it.

 

It's always best to know the local market really well and if properties are going down in value that you negotiate a bigger discounted price and always have a plan B.

 

We also suggest that you have a good contingency fund that you can use during the refurbishment phase for any unexpected expenses.