Remortgaging to buy 2nd property

[Dumplings23]

Hi, was hoping to get some feedback if possible. We currently own our house with 46% LTV. We were thinking of remortgaging to release equity and buy a property to renovate and sell on. We would be able to remortgage and have enough to buy 2nd house outright and enough to do it up.

Has anyone done this before? Thanks

I absolutely think you’d have a shot at a house not at auction by the way. Houses do come along that may suit you more.

Do you know how much the "buyers fee" for this property is? Also what ever you bid,you then need to pay vat on top so you can add another 20% onto whatever you offer, on top of the buyers fee.

That is why modern method of auction is crap. There are loads of hidden fees that are really tricky to work out. So really the guide price is already actually £250,000 if you assume the vat and a £10,000 buyers fee.

Okay, I’m totally naive and didn’t realise it was VAT on top! So it would have been £250 and our budget for bidding was only £260.. doesn’t give us a lot of scope to bid higher.

So what I don’t get is say it sells for £270 (incl fees etc) and spend £100k doing it up and then it sells for £400? Is it really worth it for £30k? Especially as you’ll then have to pay CGT on it and estate agent fees to sell.

how do people make money out of this? 🤔

You’ve given me a lot to think about, thanks. Will let you know how much it sells for!

Every house I find on Rightmove/Zoopla that needs any type of refurb is always sold through auction! Can I ask where you find yours if they’re not auction?

The buyers fee is plus VAT not the sale price. (All the fees will be plus VAT)

We make money by purchasing through a company not personally. And we don’t need finance. We prefer to purchase unmortgageable properties because it reduces the number of bidders we are up against.

Don’t be disheartened but also not everything you see on HUTH reflects real life ;-)

I might have totally misunderstood but the auction rules state that "all bids must be made in sterling and not include vat". So I assumed that or the starting price is £200,000 and you make a bid of £200,000,then you would still have to pay vat on top of that?

https://auctions.savills.co.uk/assets/files/terms_and_conditions/common_conditions.pdf

Oh, I didn’t think it included VAT. The buyers fee is £650 on this property, so wouldn’t make a huge difference.

when I was talking to our mortgage advisor they didn’t want to know about the property we were purchasing..

is that normal if remortgaging against your own home? I thought they’d want to know.

A normal auction would be not including vat and it also wouldn't need to you to pay the sellers fees!

That was sort of my point. It is really hard to make the numbers add up at the moment. Renovation costs are really high and the market is a bit crappy because of the high inflation and mortgage rates.

I’ve never paid a sale price which is then subject to VAT at a ‘normal auction’ I have paid towards the sellers legal fees and buyers fees known as a ‘buyers premium’ both of which are subject to VAT.

But every auction varies. Auction house tends to be the worst with loading fees on the buyer.

I can’t comment but I’d say the questions would arise at a later date at which point your deposit would be at risk. There are lenders who provide bridging finance for these sorts of projects but the rates are eye-watering….

1. Is the property actually mortgageable?

2. You haven’t factored in second home stamp duty

3. Any profit you make is subject to capital gains tax

4. You have to pay council tax on the property, even if unoccupied. You can only claim an exemption if it is totally unliveable and then the rules are pretty strict

I have flipped several properties and it was fine when interest rates were cheap and there were builders around at short notice. There’s a big risk these days you can buy it and then not find anyone to do the works for several months.

Yes, sorry had factored in stamp duty but forgot to list it above.

can I ask if you went through an auction to purchase the houses you bought?

Have done the maths and think it’s still possible but like I said.. don’t think we’ll have a chance. Builders/developers will have a much larger budget than us.

No, through an agent each time. Several times I saw things before they even went on the market as I was a cash buyer.

@Dumplings23 I thought you said it was MMA but the link you have sent looks like a normal auction listing?

Why would they want to know? Their money is secured against your own house. If you default on the mortgage it’s your house they’d repossess and sell. They couldn’t care less what you do with the money.