I’m currently in Australia and just starting out in property investing. The majority of my research thus far has concerned the Australian market. However I will be moving back to the UK in 12-18 months and I am looking into investing in the UK. Is there anyone who is currently investing in the UK and has any tips on how this differs from investing in Oz?
From some general googling, interest only mortgages in the UK seem to have a max 85% LVR as apposed to in Oz. From a beginning point of view I am looking to start out purchasing cashflow properties and obviously the higher deposit required in UK for interest only loans reduces how quickly I can be market ready again. Have people found this to be the case? Also is there any value in foregoing an interest only loan at 85% LVR for a PP+ interest loan at 95% LVR with the goal of being able to purchase more properties quickly with my available capital?
cheers
Hi Jcam
Not investing in the UK at the moment although I originate from the SE of England and have property over there.
For an IP loan you will struggle to borrow more than 85% anyway so whether you go IO or not probably isn’t up for debate.
Servicing in levels are more stringent than here in Australia even though interest rates are cheaper.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I m going to UK soon… I m doing the study now…. they call ” buy to let”.. many different strategies..
fancinating.. they even have a name for subletting as ” rent to rent”.. boarding house as ” HMO”.
I love the way they named those things.. I saw the property there are very cheap… ( outside london).. espcially big cities, like Manchester , Birmingham, Glasgow.. very cheap and good yield…
I m like a girl in a candy shop.. where do I start ???Trouble is Coogee with my 30 years experience in the UK market you won’t find a lender to touch such securities especially if you are a non resident and not earning in GBP.
We sold a number of excellent properties to forum members about 9 years ago with spectacular returns all of who have doubled their money but that was then and this is now.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
HI richard
when you say servicing in levels differs could you elaborate?
Also what is your opinion on the 2-5 year low interest loans that revert to a higher rate after that grace period. From the perspective of beggining my portfolio, from a cashflow point of view that is appealing. However I am away that these loans tend to revert to a rate atleast 1% higher then the fixed rate loan which puts me off.In general wHat is you opinion on these loans from a strategy perspective, as I can see the positives in using the low interest period to accumulate properties in the initial stages, and either pay down these properties when the interest rates rise refinance them? Is this something feasabile, or would you suggest fixed rate.
From a planning point of view my focus is on Leeds and the surrounding areas, good links to london/manchester, financial hub, I have spent some time there and like the vibe of the city. I have been looking at purchasing cashflow properties around the 100k mark(2bed houses) to the west which is seeing redevelopment, neighbours some more expensive suburbs and has good fundamentals. Do you have any general ideas on the area.
Thanks for your advice
Yes in Australia lenders service your loan at 7.25% on a principal & interest basis irrespective of the actual interest rate you are being charged and usually a fairly constant expense for assessing your monthly living allowance. In the UK it is totally different formula.
I think the Honeymoon products are a great way to get started and to start to pay down your loan. Just got to watch the early repayment fees or charges.
No knowledge of the North of England as my properties are down South and all of our clients have purchased in the more affluent towns / cities.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I lived London for about 9 years and started my investing career over there and still maintain a small portfolio of properties in London.
Availability of finance ebbs and flows depending on the government, recent scandals and the general mood surrounding the economy.
Investors are keen to come up with solutions to financing challenges and there is loads of peer-to-peer, crowd-funding and joint venture scenarios available that are widely used and accepted. Your due diligence to all these options is of course paramount.
With traditional lenders different products exist for pretty much every flavour of investing so make sure you find a good broker and be very forth coming with information about your project – ie, BTL (buy to let) is treated differently to HMO (house of multiple occupancy) even know they are both essentially investment loans.
The minimum mortgage coverage accepted is 125%. That is, the monthly rent is equal to or more than 125% of the loan cost (IO is most commonly used by investors). I rarely came across a product that was viable unless at 25% deposit was chipped in. Yes, higher LVR’s are available but general have prohibitive terms.
As Richard mentioned, exit fees can be horrific – read the fine print and be careful!
There is some really good property meet-up groups in London mixed amongst all the snakeoil sales educator types. Get involved and leave your credit card at home.
Let me know if I can help in any way!
Mike
Email Methanks richard and mike, appreciate it
Mike do you have any experiance with cashflow properties at the lower end of the market in the UK, I am following the steves methodology whereby he started investing in purely cashflow properties at the lower end of the market and then diversified his portfolio with growth properties, subdivisions etc when he was more setup. I plan to purchase properties around 100k mainly in manchester and leeds areas which both have good projected growth, infrastructure improvements and the price of SE england pushing people further out. From my planning I will have enough capital to purchase two 100k properties in my first year and that is what i intend to do Any tips specific to the UK market when looking at properties in this bracket?
also looking into mortgages, i understand that if buying an investment property to rent out you must take out a buy-to-let mortgage. i am assuming this is only true for people buying in there name, are you able to take out a standard residential loan if buying through a trust structure. as the buy-to-let mortgages have much less favourable terms
Hey Jcam,
Regardless of the property and the amount you are investing the same fundamentals apply in terms of the due diligence you’re going to undertake. I started with the lower end of the market in London but know many people that invested in the Midlands and further North.
Like any market there are pockets of high performing properties regardless of the market conditions.
Since your looking for cashflow, try to find properties where rentals are in demand – students, medical, professionals etc. HMO’s are a great way to drive your cashflow up but they require some work and management so be aware of this.
If you’re going the let the property you need appropriate finance or you could run into all sorts of issues down the track. Some lenders will provide you with “consent to let” which is if you have taken out a residential mortgage but then decide to let the property out. This however can result in more fees.
Best to get some advice from a broker on this though as it’s a moving target.Hope this helps, good luck!
Mike
Email MeThanks for your responses guys, another question regarding trust structure and income tax
I am familiar with the tax rules regarding discretionary trusts in Oz, whereby the beneficiary is taxed at there marginal rate on income received from the trust. Therefore trustee’s should spread payments to the beneficiaries in the lowest income tax bracket/lowest salary in order to reduce the amount paid on income tax from trust earnings as a whole.
However I have begun researching trust structures in the UK and it seems that any income earned by a beneficiary from a trust is taxed at 45% after the first £1000. I also note that beneficiaries of a trust can claim a tax refund on income received from a trust. But this depends on tax credits available in the “tax pool” of the trust etc.
IS anyone able to explain this further to me, offer any advice on the best trust structure to use for investment in england or recommend anyone I could contact for advice on this matter?
cheers
I am based in the uk and can get debt as im working there and it is very easy to find cash flow positive deals
However, buy to let loans are generally at 50% lvr
Given the exchange rate difference I am keen to purchase another couple of investments as I think the time is right.
Anyone keen to go on a jv basis with me and build up a portfolio?
I also have equity to invest.
Does anyone have any suggestions for research tools for the UK market, equivalent to things like CoreLogic and DSR?
Hi all I am interested in investing in UK too.
Do you know any good sourcing agent there? Any suggestion about interesting areas/cities to invest in?
Thanks
I’m in the UK now, having moved back from Sydney last year.
And, yes, I’m looking for deals to invest in the near future.
Mortgages are harder to obtain here. All sorts of objections have been given by lenders, EG:
Must have been UK resident for the last 3 years
Employed, being paid GBP, not self employed.
Must own your residential property before lending for a Buy To Let property.
Max LTV based on rental income, not asset value. This is approx 50% LTV max, in the areas I want to buy.
All the above can be overcome but at a far higher interest rate and only, in my experience, on a fixed 2-5 year rate. After which, the rate balloons, forcing you to remortgage.
But, if you can tick all the boxes, a Buy To Let loan can come in around 2.1% Try getting that rate anywhere in Australia!!
Final warning: remortgage/ refinancing any investment property in the UK is near impossible, if you are not living in the country. Therefore, if you plan to hold on to the properties and live overseas, you will struggle to access equity to fund further investments.What happens once the fixed period ends and you try to refix. Can you refix with overseas income? Or are you stuck on higher variable?
Does anyone have any experiance implementing a trust structure in the UK? can outline the differences as far as structuring is concerned?
Refixing (remortgaging), is not easy but some brokers specialise in mortgages for expats. The only back-door way to remortgage is to do a ‘product transfer’ at the end of the fixed period. This can only be with the same lender and only switches you to the lenders variable rate which is much higher (as far as I’m aware). I understand that few questions are asked and little proof is required to make this happen. Everyone I’ve spoken to here has little interest in overseas income to support loan applications in the UK and, in my experience, it appears to raise more negative questions about serviceability than to bolster your credit rating.
So say I buy a flat and I get 2 years fixed. Then after year 2 I decide I want move back to Australia.
Can the bank reject consent to let? If they do can I refinance into a lower LVR buy to let mortgage?
If they don’t give me consent, I will need to refinance the loan into a buy to let loan on a much lower LVR. Will I be forced to sell at this point as I can’t convert it to a Buy to let loan because banks wont touch non uk income to refinance my product into a BTL loan?
Pretty shit lending environment it appears for overseas investors. Once you get a loan in aus, no consents needed for investment loans with most lenders
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This reply was modified 7 years, 2 months ago by
propertyboy. -
This reply was modified 7 years, 2 months ago by propertyboy.
Refixing (remortgaging), is not easy but some brokers specialise in mortgages for expats. The only back-door way to remortgage is to do a ‘product transfer’ at the end of the fixed period. This can only be with the same lender and only switches you to the lenders variable rate which is much higher (as far as I’m aware). I understand that few questions are asked and little proof is required to make this happen. Everyone I’ve spoken to here has little interest in overseas income to support loan applications in the UK and, in my experience, it appears to raise more negative questions about serviceability than to bolster your credit rating.
Thanks mate that is very helpful.
By product transfer do you mean convert from home loan to lower lvr buy to let loan? At this point would you need to contribute hard equity to bring LVR back to buy to let levels or do the banks lets you keep lvr as is?
Most BTL loans i’ve seen are around 50% compared to home loans of c.85%. This would be a very big equity hit you’d need to inject to do the product transfer – assuming valuations don’t rise.
I understand lenders give consent to rent temporarily and add 1% on existing interest rate. But what happens if I want to keep my loan in place for the whole 30 years. Can the consent to rent last the whole 30 years?
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This reply was modified 7 years, 2 months ago by propertyboy.
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This reply was modified 7 years, 2 months ago by propertyboy.
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This reply was modified 7 years, 2 months ago by propertyboy.
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This reply was modified 7 years, 2 months ago by propertyboy.
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This reply was modified 7 years, 2 months ago by
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