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Property: a side hustle or a full-time career?

bridging finance Sep 25, 2020

A property career often starts as a way to supplement your full-time income, these days known as a ‘side hustle’ or ‘the 5-9 job’. 

Some people keep it that way, finding a couple of properties and letting an agency manage them, so the rental income pays for holidays and the occasional new car.

Some start off with that intention and then get bitten by the property bug and have aspirations to build a full-time income from the property market. 

If you’re planning to buy-to-let, the challenge is always the time it takes to save up for the next purchase, then your capital is trapped in the property until you’ve made enough for the next property - and so-on.  In the first few years you’ll be saving up a lot, so holidays and new cars may be off the agenda.

However, buy-to-let is not the only way to get into property investment.  A great way to build up your cash pot is to do flips.  In other words, find a property with potential and a motivated seller and do a deal to buy below market value.  Then resell at a higher rate - and out comes your money, right away!

Some people buy properties that need refurbing and turn those around and then resell at a higher value.  Either way you’re building your cash pot up - but here lies a problem.

If you have saved up your 25% deposit and need a mortgage to make the purchase, when you intend to sell as quickly as possible, your credit rating and mortgageability are both going to take a hit. 

  • Mortgage companies don’t like lending to people who redeem quickly - they don’t make much interest if the loan is paid back within a few months.
  • Every time you apply for a mortgage you’re credit checked. Too many credit checks from lenders - where the credit is then refused, don’t do your credit rating any good at all.
  • If you are intending to ‘flip’ the property i.e. selling one relatively soon after buying it, then mortgages are a wholly inappropriate way to finance it anyway. No mortgage lender is going to agree to lend if they know that is your intention – and not telling them (conveniently) is obtaining a mortgage by deception.

If you’re now thinking that you need to rethink your strategy - you’re right, but it’s not as complicated as it seems.  You see, there’s always bridging finance.

Yes, the interest you pay is higher, but bridging lenders have a different approach.  They see your new property as collateral on their loan, so it’s not about long-term lending.  Bridging lenders specialise in short-term lending - that’s why they’re called ‘bridging’ lenders - they offer a bridge between where you are now and a long-term solution.  In the case of property either the sale or, if you’ve bought a property for a song that you need to refurb, that would be the point where you apply for a buy-to-let mortgage at its higher value.

The other advantage of bridging is that, with the right lender, you can get a loan against the full value of the property, even if that’s more than what you actually paid.

For example:  If you find a property needing a bit of a refurb with a seller who just wants to get rid of it (maybe a probate property, someone moving for work, a divorce where both parties want to move on), you may be able to negotiate them down to well below market value. 

Let’s say similar properties are selling for £200K, but you can talk the vendor into selling for £150K - and you can promise to complete within 28 days.  You could get a bridging loan for 70% of £200K - as long as the bridger’s surveyor agrees that the property is worth that. 

So all you need to get make the purchase is £10K plus whatever you need to do the refurb.  Refurb done, you can then apply for a mortgage for the full £200K if you want to keep it - or sell it on, pay off your bridging loan and have a good profit in your bank ready for the next one.

If you aspire to quit the day job - a few of these flips and you’ll be able to make enough to live comfortably while you build your property investments up.

You can learn more here:

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