Small HMO and Multi-Unit Purchase for Experienced Buy to Let Landlord
The Client: An experienced buy to let landlord with two existing investment properties held in his SPV limited company.
The Property: A three-bedroom flat on the first floor of a converted semi-detached house. The property was marketed as an HMO, so it had shared kitchen and bathroom facilities for un-related tenants. Situated in a popular coastal town in the South-East, it had plenty of local amenities and transport links to nearby large commuter towns.
The Finance: Our client already owned the downstairs flat when the upstairs flat came onto the market. Having saved rental profits, he wanted to expand his buy to let portfolio and required a 75% LTV limited company buy to let mortgage to complete the purchase.
The Challenge: The first challenge with this case was to find a lender that would accept 100% exposure on a small multi-unit freehold block. Many lenders would consider this too high risk as resale could be challenging in the event of repossession. Furthermore, the chosen lender would also need to be comfortable with the HMO element, even though it was a small number of bedrooms and didn’t require an HMO licence.
The Solution: Due to the specialist nature of the case, we approached a lender that was likely to accommodate such complexities. They take a very pragmatic view of what landlords need and assess on a case by case basis. We talked to them about the property, in particular the exposure element. As they will accommodate multi-units of up to 20 self-contained units and HMOs up to 20 bedrooms, they were happy to proceed, subject to valuation.
However, the valuer found significant damp in the property, which was a cause for concern. Fortunately, the vendor allowed our client to complete the necessary works and modernise other aspects of the property to bring it up to a lettable standard. Once works were complete, the lender revalued the property for free, and we were able to proceed to completion of the mortgage. Here are the details: