A longstanding client, a landlord with a portfolio of 30+ rental properties, contacted us looking to ‘transfer’ his personally owned rental properties into a newly created Special Purpose Vehicle limited company on the advice of his accountant.
In reality this type of transaction is not a straight ‘transfer’ – the client must in fact sell each property to the SPV which is a costly business in the short-term. However, the client’s accountant had calculated that the short term pain would be outweighed by longer term gain, particularly from a tax perspective.
The client wanted to start the process by ‘transferring’ a 2-bed flat within a converted town house in a popular Essex town.
A combination of several factors to this case meant we would need to approach a specialist lender:
- We needed a lender that has products for limited companies. Many mainstream buy to let lenders only have mortgages for personal borrowers.
- The landlord has a very large portfolio and derives all of his income from rent. Most mainstream buy to let lenders only work with landlords with very small portfolios and prefer them to have alternative income from rent, such as a ‘day job’!
- The vendor and purchaser are related. Many lenders steer clear of this type of transaction because of complications that can arise if the debt is not serviced.
- The client wanted a 25 year term but this will mean that the lease on the flat will have less 50 years to run, which is the standard minimum threshold for many lenders.
- The deposit comes in the form of a director’s loan which is not acceptable to many lenders.
The lender we approached has a strong track record of lending to portfolio landlords with complex borrowing scenarios.
Not only did the lender agree terms on the flat, it is also willing to help our client finance the ‘transfer’ of more properties within his portfolio.
Here are the details of the first transaction.
Property value: £170,000
Loan amount: £102,000
Rate: 4.29% 5 year fixed
Term: 25 years interest only
Lender arrangement fee: £1,275
Borrower type: SPV Limited Company
Mortgage payment: £369 pcm
Rental income: £825 pcm
Gross yield: 5.8% pa
Consultant: Gavin Richardson, 01732 471613
ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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19th October 2016