Remortgage advice for investment

SeosamhJ

I want to buy two rental properties for €100,000. The monthly rent from both will be €1,100 after expenses (management fee and building fee). I have another rental property that is valued at €250,000, current mortgage €280,000, that is rented for €1,400 a month. The mortgage on this is €1,600 a month.

My salary is €600 weekly with no large outgoings.

I have another two apartments generating €1,000 per month after expenses that are mortgage free and €30,000 in disposable cash.

I have contacted a mortgage broker who had no luck with two banks, my question is do you have any recommendations on where to go to make this happen.

Thanks for your time.

khamilto

You have an annual salary of €31.200 and want to own five rental properties?

lcwill

What was the reason they gave for refusing? The negative equity mortgage? Salary too low?

Could you remortgage the two mortgage free properties to 50%LTV (releasing about 100k) and use that as 50% deposit for the 2 new properties?

If the negative equity is a problem use the 100k released from remortgaging and some of your spare cash to get the 280k mortgage down to 75% or so and then see what you can do with whatever is left (maybe just getting 1 more apartment instead of 2).

I don't think prices are increasing so fast any more and there is uncertainty around the elections (and the whole future of buy to let if you look at what is happening in England) so I wouldn't be rushing into buying lots of properties at the moment, especially on your salary which doesn't give you a lot of margin if things go bad.

April 73

Do you mean that the monthly rent from both €100k properties, after expenses will €1100 or that each will generate €1100?
Is that salary gross or net?

The_Conductor

Seosamh- it is doable- but its messy

1. Having 5 rental properties on the go- will be as good as a full time job in its own right- unless you have a management agent to take care of the day-to-day things- but if you do- it'll cost you 10% of the gross rental income (however, it is an allowable expense for tax purposes).

2. While its great that you have 1 or 2 properties entirely free of mortgages- its not tax efficient (your big cost you can put against the rental income- is 75% of mortgage interest).

3. You're already in the higher tax band from your independent income- so your marginal rate of tax on the rental properties will be up to 52-53% (esp. for those without mortgages). Is it worth the effort- esp. for those unmortgaged properties- given your limited net income from them?

4. The finances you're discussing look a little unbelievable from a financial perspective- you're implying a net (before tax) income from 2 investment properties of north of 10%. This doesn't ring true in the current climate. Also- while you're factoring management charges and building fee (whatever on earth a 'building fee' is)- you're not making any allowances whatsoever towards anything else........ What happens if you have a heating system go- and have a 3k bill presented to you out of the blue- as I've had this week- you've not factored any of this into the equation.........

5. No indication of whether your 600 salary a week is net or gross (before or after tax and other deductions). If its net- you probably have a gross salary heading towards 55k. If its gross- you're down at 32k. Any further lending to you- is based on a multiple of this- cognisant of any negative equity on current loans.

6. 30k in disposable cash- is sufficient deposit to support the requested loan- but not much more. As an investor you need a higher deposit- than a regular purchaser.

Ideally- if you want to borrow to fund BTL property- you are going to *need* a higher deposit amount- lenders are not keen on BTL investors (given the amount of issues they still have on their lending books hung over from the boom.

If you want to make this happen- save a larger deposit- and then go back to the lenders again.

Cuddlesworth

khamilto wrote: »

You have an annual salary of €31.200 and want to own five rental properties?

60k a year, 30k income, 30k rent. Current Mortgage of 1600 per month, owes 280. Asset of 250k plus 2 unknown apartments.

I'd assume he would have to show proof of income tax on rental earnings so there is no huge tax bill on the horizon.

To me and I could be off, another 70k would leave him at a leveraged amount of 350k on a income of 60k, I can't see a underwriter signing off on that as is. Have you offered your two mortgage free apartments as collateral against the loan?

the groutch

leveraging against other mortgaged rental properties.
loans based on potential rental income.
is it 2006 again?

Cuddlesworth

the groutch wrote: »

leveraging against other mortgaged rental properties.
loans based on potential rental income.
is it 2006 again?

Yes, there are property's around me that are back trying to sell at 2006 prices.

handlemaster

I think these kind of threads are going to prop up lore and more expecially when the elections are over next year and people tak a look at investing again in property. The market has levelled out and that gives confidence