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Advice on investment / refurbishment property + 2nd mortgage

  • 25-08-2021 5:10pm
    #1
    Registered Users Posts: 1,959 ✭✭✭ VonLuck


    I've always had it in my mind that I would like to purchase a run-down property with a view of refurbishing it and either selling it on or renting it out. Before committing to anything, I wanted to be sure that this isn't some crazy pipe dream. Can anyone give me some guidance on the below?

    • I currently have a mortgage on a property which I live in. What are my limitations on getting a second mortgage for an investment property?
    • Can rental income as part of the rent a room allowance in my current property count towards the overall income assessment for a second mortgage?
    • If a property is for sale via auction, is a mortgage viable or are these cash sales only?
    • Can a second / investment mortgage also cover the cost of refurbishment or would this need to be a separate loan?
    • Is €1,000 a square metre a reasonable initial estimate on refurbishment costs assuming no major structural works (i.e. generally only finishes, fittings, kitchen, bathroom to be replaced). I'm aware this will fully depend on the property, but just using this as a starting estimate. Any individual upgrades (e.g. new windows) I would cost separately.

    If any of the above is a non-runner then I'll just abandon the idea of refurbishing a property. It'd just be good to know whether I should devote any more time to researching it. Thanks.



Comments

  • Registered Users Posts: 414 ✭✭ Emma2019


    Auctions require you to pay over the funds within 21 or 30 days. A lot of banks say they can't guarantee funds within that timeframe so generally auctions are left to cash buyers.

    Refurbishment mortgages are available but they are more complicated and I haven't heard of anyone but first time buyers getting them.

    There is a self build group on Facebook that's very helpful and would tell you if your cost estimates are reasonable and how the mortgages work. However my 2 cents would be that there aren't that many houses that just need a facelift (in Dublin at least). The houses that need doing up are usually probate cases where it was an elderly persons house or nobody has lived in them in a few years and very frequently you're into the likes of rewiring and some structural repairs.



  • Registered Users Posts: 1,959 ✭✭✭ VonLuck


    So essentially I would need to have mortgage approval well in advance of even looking for an auction property? Auction properties are not typically advertised for too long so by the sounds of it I'd have to have everything lined up before even looking!

    Lets say hypothetically I was able to get the cash to buy the property with cash, but have nothing left for refurbishment. Could someone like a Credit Union give a home refurbishment loan to cover the subsequent costs to bring it up to scratch? In my own mind it would seem easier to get a home improvement loan than a second mortgage, but it's not something I've investigated thoroughly.

    Noted on the lack of properties in Dublin, but I would be looking further afield. If there is something seriously wrong with a house before buying I'm pretty confident I'd be able to pick it up, assuming I'm able to attain the required info to do a full check. If not, I'd back away.



  • Registered Users Posts: 414 ✭✭ Emma2019


    Well having mortgage approval in advance of properly looking is generally par for the course. I more mean banks are saying they cant guarantee you'll be able to go through the drawdown process and actually get the cash within the 30 days. Depends on your bank though so ask the banks you're looking at.

    Buying at auction also means paying for surveys for houses you may lose the bidding for too so bear that in mind.

    Credit unions and banks can lend for refurbishment alright, and there are SEAI grants too. Depending on how affordable your mortgage is you may have to wait until you've drawn down to apply for the refurbishment loan.



  • Registered Users Posts: 1,959 ✭✭✭ VonLuck


    Well I would be coming at it from a different viewpoint. I wouldn't be looking to buy an investment property just for the sake of it. I would be waiting for the right one to come along so I wouldn't necessarily have mortgage approval in advance. Makes it a bit more tricky, unless I continually apply for mortgage approval on the off chance that a suitable property comes up. I wouldn't be in any rush to purchase.

    I wouldn't be worried about survey costs for auction properties.

    My feeling is that I should talk to a few banks to get an insight to what my options are, am I right?



  • Registered Users Posts: 414 ✭✭ Emma2019


    Pretty much!

    And also get an idea of what works you're willing to carry out and how much they'll cost. Bear in mind construction costs are at an all time high at the moment and I'd guess will stay that way for the next year or two at least.

    If it was me I'd pick a sample house that recently sold that you might have been interested in and cost what you think might have needed to be done and see if it is at all feasible.



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  • Registered Users Posts: 1,959 ✭✭✭ VonLuck


    Very useful information. It's just a matter of getting pen to paper and actually figure out if it's doable. It's always felt out of reach, but that's without putting any solid figures to it. Once I know the minimum I'll need at least I can work towards that target.



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