I own outright two properties, which are rented out; both are worth £85K and both yield 9.5%. I've owned them for four months they have been let for two months. I have no proof of income as I've just started doing this full time. Can I get a BTL mortgage for these properties at a competitive rate anywhere, or do I need to wait six months and go through TMW?
The wider issue here is that you can buy properties for cash, with all the advantages that brings, but you don’t want to then wait six months plus before you can repeat the process. If mortgage lenders (the ones that give you the best rates) require you to own the properties for six months before you can apply for a mortgage, you are missing out on potentially lucrative deals because your cash is trapped in these properties.
As you have bought two properties worth £85K each you already know that being a cash buyer allows you to close deals fast, to negotiate harder, to buy unmortgageable properties and probably to make bigger profits. This will be of great use for the solution to your problem.
Using your own cash to buy is a wise move because you have zero borrowing costs. The only problem with that is when you find your next corker of a deal you cannot buy it because you have no available cash.
The answer, or at least one answer, is to use bridging finance using either or both of your unencumbered properties as security. Bridgers will lend 70% LTV, so that gives you £119K of usable equity to buy another property.
You can leverage this money at any time from the point you became the owner of these two £85K properties. This means there is no need to go for poorer value mortgages, which you will most likely have for the next few years, and just wait out the six months then get your best mortgage deal.
This means you don’t miss out of the corker of a deal plus you can use all the skills you have honed as a cash buyer to get a great deal on your new purchase. In this context, bridging allows you to mimic exactly the behaviors you have already learned by being able to buy for cash. In other words, bridging mean you can operate in the same way that cash buyers do, without the need to actually have the cash.
In summary you will now own
When the 6 months are up you can get a good rate BTL mortgage on your two original properties. This will repay the bridging loan and probably give you some extra cash in the bank.
Your third property is still owned outright and you are waiting for the 6 months to tick by so you can get a good rate BTL mortgage on it.
Should you find yet another corker of a deal during those 6 months, you can rinse and repeat the process by just repeating the bridging process on the 3rd unencumbered property to allow you to buy the 4th for cash ... and so on and so on.