Cheapest Way to Buy a House in 2024 (Residential To Buy-To-Let)

In a recent video, I explain the cheapest way of getting on the property ladder (via residential to buy-to-let). You can buy a house for potentially as little as £5,000. This is something that I have been teaching within my Academy for a few months and the amount of properties that are being bought is just incredible.

In this article, I will summarise the problem, the residential to buy-to-let strategy and a real life case study. If you want the full details of exactly how to do this yourself, I highly recommend watching the full video (above) until the end. If you find this article helpful, please consider sharing it on social media. The more people that understand this strategy, the better!

The Problem

The problem is that for the average person to actually buy a house as an investment, you need a 25% deposit. On top of that, if it's an investment property, you've also got to pay stamp duty. An average house is £250k. Your stamp duty is going to be about £8k. So you need your 60k deposit, plus £8k stamp duty, and legal fees. You're talking 60k-70k all in!

Many people are in a decent job, they're on three, four grand a month, but they can't save enough to buy a house. It takes 10 years to get the deposit, and then the house has gone up in value anyway. This is because houses on average double in value every 10 years. This means they end up not buying anything.

The Residential To Buy-To-Let Strategy

This new strategy is called residential to buy to let. This is where you buy a residential house, and you turn it into a buy-to-let. Now why is this awesome? Number one, when you're a first-time buyer, and you buy a house to live in, you don't pay any stamp duty. Number two, when you buy a house as a residential house to live in you can get up to a 95% mortgage!

You might be thinking, why would I want to buy a house to live in? You'd be right to think that because if it's a house to live in, you can't make any money from it! You can't rent it out. You have got a residential mortgage, there are so many restrictions. How's that going to make you money?

Let me explain. You're going to buy a house that needs work done to it. It maybe needs a new kitchen, new bathroom, etc. Let's say you buy a property for £150,000. Well, if you get a 95% mortgage, that means that your deposit is only £7,500. Now, what you're going to do is you're going to refurbish the property.

You can do this with a personal loan because once you own the property, you can get a loan. You can do some home improvements. You could put some elbow grease in and do the work yourself. So let's say you spend £15,000 giving the property a light refurb and now the new value is £200,000.

What you're now going to do is you're going to switch the mortgage over to a buy-to-let mortgage. You might have to wait 2 years to do this because a lot of residential mortgages will fix you in for 2 years. After 2 years of living in it, you hopefully have got a bit of natural capital appreciation, but you've also forced the value up via the refurb.

Now, you're going to get a new valuation. Let's say the new valuation comes in at £225,000. Then, you are going to get a buy-to-let mortgage. A buy-to-let mortgage requires a 25% deposit, but remember you've pushed the value up. So, if the new value is £225,000, you're going to get back £168,000. But you only bought the house for £150,000. Therefore, you're paying off the mortgage, and you're getting your deposit back as well. This is the most strategic way to buy a property with very little money!

Residential To Buy-To-Let Case Study

My friend Elliot bought a property in Shrewsbury for £178,000. He had to put in a 10% deposit, which meant that his investment was £17,800. He spent £30,000 on a refurb, doing the property up. It took him 12 weeks. He then got the property revalued at £250,000, which meant that his profit from that 12-week reverb was £42,000. If he wanted to, he could sell the property. Excitingly, because it was his home residence, he wouldn't pay any tax. No stamp duty, no capital gains tax, no tax at all. Pure profit in his pocket!

He could also refinance it onto a buy-to-let mortgage. He would now get a new buy-to-let loan of 75% against the new value of £250,000. This would mean that his new mortgage was £187,000, which would pay off his old mortgage. On top of that, he'd have the difference back in his pocket, which would basically have paid for his refurb. This would mean that all that would be left in the deal was his small £17,000 deposit.

Now, there is a small problem with that. If he refinances on a buy-to-let mortgage, and it's still in his personal name, he would have Section 24 tax to deal with. This would mean that the new mortgage payments wouldn't be tax-deductible. Also, the potential rent on the property is only about £1,200 at best, so he wouldn’t end up making much profit.

Therefore, he went with option three. This is where there's a secret twist to the strategy that gets even more exciting. He refinanced it not on a buy-to-let mortgage; not on a residential mortgage; he refinanced it on a furnished holiday let mortgage! He gets nearly all of his money back, but now his new mortgage permits him to rent the property out as a holiday let. So, the property is set to make him around about £3,000 profit a month!

Residential To Buy-To-Let And Other Property Investing Strategies

Do you want to learn how to do residential to buy-to-let investments and other property strategies? Why not learn from a property expert? Join me at my next training event!

On the course, you will learn how to:

Become a property investor using other people’s money so that you can get started straight away
Utilise the 5 different types of raised finance so that you know exactly what to offer and when
Find the perfect properties for the BRR strategy
Recycle your money so that you can ‘rinse and repeat’
Build a power team you can trust, so that you can save time and money
And much more!