How to fund deposit on first BTL?

[Saffy]

Hi, I am looking at buying my first investment property and have no experience whatsoever so it is a big jump for me. I have found a property I am interested in but am curious as to the best way to raise the deposit. I do have equity in the property I live in and so can raise the money from that, but wonder if that is the best way to go?

I have seen many property 'gurus' advertising they can show you how to buy property without spending a penny of your own money - I realise this is too good to be true - or is there something I am missing?

Any advice will be welcome and I would like to say what a fantastic site this is and that the members seem very helpful indeed.

Thanks,

Fiona

[MrWoof]

Buy to let is a good investment but the caveat is that it is long term, I would say 10 years plus. Before buying a place, check with local agents that the property is right for the area, also the achievable rent is acceptable. Typically, lenders will want a 15% deposit and that your rent is at least 30% greater than your mortgage repayments. Go for an interest only mortgage, again, the benefits of this are long term. Raising money by remortgaging your own place is acceptable but don't rely on rental income to cover that expense.
I would suggest that, initially, you go with an agent, until you feel satisfied that you can handle it alone, but don't sign a contract with the agent or you will find it difficult to leave. Check that the agent does the work required and preferably that they are members of ARLA or RICS. If they claim membership, check. Most agents are good, a few are only in it for their own benefit.
As for buying without spending your own money, technically, you are using the bank's money but I don't think that counts, I am sure that if these 'gurus' really had a system, these pages would be on fire with it. Remember this word, TANSTAAFL, There Ain't No Such Thing As A Free Lunch. (Robert Heinlein)

[Ericthelobster]

Typically, lenders will want a 15% deposit and that your rent is at least 30% greater than your mortgage repayments. Go for an interest only mortgage, again, the benefits of this are long term. Raising money by remortgaging your own place is acceptable but don't rely on rental income to cover that expense.

What is still a bit of a mystery to me is how, having realised 15% by remortaging your own home to buy an investment property, you can then raise more dosh for subsequent BTLs.

I thought the general idea was that people would tended to remortgage their first BTL once property inflation had hopefully done its stuff, and that they then used the extra cash realised as a deposit for BTL number 2. However, that scenario would leave BTL 1 with a significantly larger mortgage payment, and the rent received would no longer exceed it by 30% (and therefore, the remortage would not be granted!). What am I missing here?!

[Saffy]

Thank you for replying to my query. At the moment we are having problems getting the amount of mortgage we need for the new property. Might have to remortage our house for a bit more. I am sure I will be back with more queries :).

[MrWoof]

Eric, The scenario you paint is the one I use to expand my business, in my area, remortgaging to buy realises an extra £150/month after taking the increased payments into account. You still have to maintain the 130% on both properties and currently this is a problem because of interest rate rises. Remortgaging your own home to raise an initial deposit is acceptable because this is set against your own house. Wierd thing is that all my properties are secured against my own home - with the same lender!