Should I pay cash for a flip?

[AshADA]

Hi All,

 

I've done a refurbishment befpre and was fortunate to have made on that one £29,000 - Question is, I know i have £52,000 cash aswell as owning a residential property.  I'm only 24 so a bit new to this but been researching and reading everything I can so ready to make my next project.

 

Question is: Should I buy a house for £40-50k cash.  Then get a loan of £20k to refurbish the house.

 

Or do bridging then use remaining cash to refurb?

 

I know bridging can be interest heavy so my idea of cash is cheaper and then a loan can just get a flexible one and pay off as soon as house sells.

 

Let me know your thoughts 

Thanks 

[Dino V]

If you're only planning on doing one and not buying another until you've sold it, then cash will be a lot cheaper, assuming you can also get the loan. Even if you couldn't get a normal loan, bridging for the works would be a lot cheaper than bridging all of it. No idea where you've got your cash at the moment, but you'll be getting <2% if secure and about 7-10% if unsecured (peer to peer etc). Bridge is likely to be up to 1% a month, plus fees which will be a considerable percentage for a cheap purchase.

Risks are that all your cash is tied up, so you might want at least an emergency fund for your own home and that if another opportunity comes up, you'll have no cash. But in reality, if another great opportunity comes along, you could bridge on the existing house and on the new opportunity anyway. 

[AshADA]

Hi Dino, thanks for the response.  Currently my cash is just sitting in the bank 20k Isa and 32k current account.  I've done peer to peer pending before but don't want to lock money away for a fixed term as was hoping to purchase a house at auction in the next month or so.  I did speak to my morgage broker about bridging finance and he said most lenders will only lend a minimum of 40k / 50k... obviously I will only need around 20k plus some emergency fund if worst case happens.  Does this sound right or do you think the broker isn't correct?  (He is whole of market he said and doesn't charge any fees either).  

 

When it comes to the loan part I think with my credit score and wage from my job it shouldn't be a problem but if it happened that I coudlnt get one, I would hopefully make on capital and possibly sell to another investor later down the line anyway... seems better than having the money sitting in the bank anyway but let me know your thoughts.