We were approached by a family group of four directors who amongst them already own six investment properties in various combinations of ownership, i.e. partnerships or limited companies.
Each of the directors is either employed or self-employed with a provable independent income outside of the property rentals.
The directors were looking for finance so that their SPV limited company could purchase a two-bed flat above a convenience store.
The purpose of the acquisition is long term property investment with no immediate need to draw any income.
The number of lenders willing to look at the case was restricted because the flat is above commercial premises and the SPV structure is so complicated.
Instead of a straightforward four-way 25% split, three of the directors did not hold any shares at all. One director owned 25% but two other directors each split their ownership as wife 5% and under 18 son 20%.
The final 25% is owned by the wife and daughter of the brother of two of the directors. (Lost? We were…)
Most of buy to let lenders will insist upon the directors also being shareholders but we found a more commercially minded lender prepared to take a view and rely upon the personal guarantees of the directors to support the borrowing.
In addition to a very keenly priced term tracker product with reasonable fees the lender offered up to 75% loan to value which is not common on flats above commercial premises.
Here are the details of the deal:
Property value: £272,500
Loan amount: £200,700
Borrower: SPV Limited Company
Rate: 3.49% for loan term (Bank Rate + 2.99%)
Term: 25 years interest only
Lender arrangement fee: 1.25% (£2,509)
Mortgage payment: £584 pcm
Rental income: £1,150 pcm
Gross yield: 5.1% pa
Consultant: Chris Longhurst, 01723 471607