Two self-employed individuals approached us for help in sourcing a mortgage for their third buy to let investment. Using a newly established SPV limited company, they have plans to build a substantial portfolio as and when funds allow but because they have other ‘day jobs’, they are not planning to take a salary or dividends from the company any time soon.
As directors of the SPV, the clients have recently purchased two standard buy to lets both of which have completed within the last seven months. The third purchase is a freehold block of flats in the South West comprising three 1-bed flats and two smaller than usual studio flats (less than 30sqm) – all of which are self-contained and are already generating a strong yield.
The main challenge in finding a mortgage for this type of property is two-fold:
- Most lenders insist that the borrowers have experience of operating multi-units or, at the very least, have owned buy to let property for several years
- Many lenders will not finance small studio flats.
Clearly, this was a case for one of the specialist lenders, so we approached Keystone Property Finance, which we know will consider both inexperienced landlords and studio flats less than 30sqm. After some negotiation on our clients’ behalf, Keystone agreed to lend not least because the property was producing a very strong income. The directors chose the following rate from the Classic Range:
Property value: £243,000
Loan amount: £182,250
Rate: 4.49% 3 year fixed
Term: 20 years interest only
Lender arrangement fee: 2% (£3,645)
Borrower: SPV Limited Company
Mortgage payment: £695 pcm
Rental income: £1,960 pcm
Gross yield: 9.7% pa
Consultant: Chris Longhurst, 01732 471607