Sale of leasehold flat to newly established SPV where freehold is owned by related party

Sale of leasehold flat to newly established SPV where freehold is owned by related party

09.05.17 | Written by: Gary McKenna

We were approached by a married couple – both experienced investors with over 20 properties in their portfolio, looking to sell a one-bed leasehold flat to their newly established SPV Ltd Co.

The flat is part of a block of four in South East London, to which the clients also own the freehold.

The couple wanted to repay the existing mortgage on the flat, whilst raising £60,000 during the sale to finance further property investment.

This case was a challenge to place because lenders tend to steer clear of transactions where the freeholder and leaseholder are related.

We contacted a specialist lender which accepts this type of transaction and offers competitive terms with the RTI stressed at pay rate. The following terms were offered:

Property value: £180,000

Loan amount: £135,000

LTV: 75%

Rate: 3.95% 5 year fixed

Term: 25 interest only

RTI calculation: 125% @ 3.95%

Mortgage payment: £451 pcm

Previous monthly payment: £305

Lender arrangement fee: 1.5% (£2,025) added to the loan

Rental income: £ 700 pcm

Gross yield: 4.67% pa

SPV Ltd Co or Trading Ltd Co? SPV

ConsultantGary McKenna, 01732 471652

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.