- Full-time landlords in their 60’s with 14 rental properties
- Selling their personally owned ex-local authority rental flat above commercial property to their SPV Ltd Co
- SPV Ltd Co is newly established with 3 directors – mother, father and daughter
- The daughter had been added as a director, so they could obtain a longer mortgage term, as they were restricted due to their age
- Selling to their Ltd Co for tax reasons and to raise capital
We were approached by a broker looking to place an associated transaction for his professional landlord clients, a husband and wife, both in their late 60’s who were looking to sell their personally owned rental property to their newly established Special Purpose Vehicle limited company.
On the advice of their accountant the couple had realised it would be more tax efficient to start borrowing via a limited company. They also decided to use the opportunity to raise some capital for further purchases.
The property in question is a two-bed, ex-council flat situated above an off-licence in Birmingham.
There were numerous complexities with this case, meaning a specialist lender would be required:
- This type of deal is classed as a related transaction, something which isn’t accepted by all lenders
- As the couple are in their 60s they needed to add their daughter as a director to their SPV Ltd Co in order to obtain a 25 year term
- The flat is above a commercial premises in a predominantly commercial street, a scenario many lenders avoid due to potential resale problems
We knew that this case would fit the lending criteria of Keystone Property Finance which offered the following terms and the deal went through without hitch.
Property value: £155,000
Loan amount: £100,750
Rate: 4.79% 5 year fixed
Term: 25 years capital & interest
Borrower: SPV limited company
Lender arrangement fee: 2% (£2,015)
Mortgage payment: £586 pcm
Rental income: £625 pcm
Gross yield: 4.8% pa
Broker proc fee: 0.5% (£504)
Consultant: Julie Priest