Complex Multi-Property Purchase for High Net-Worth Landlords with Home-Owner Business Loan
The Clients: Highly experienced and high-net-worth landlords, the couple had a substantial and complex portfolio. While their specialism is serviced accommodation, they wanted to diversify further with different property types.
The Properties: Our clients were looking to purchase two new complex properties. The first was a semi-commercial unit consisting of two retail units and four residential flats, all under one title. The second property was a three-flat multi-unit freehold block (MUFB). Situated close to a popular commuter town centre in the South of England with plenty of local amenities and walking distance to a train station, both properties would be high-yielding additions to their portfolio. In addition, both properties had planning potential; in particular, the semi-commercial unit would likely be prime for converting into a full residential block. Recognising this potential, our clients were thinking strategically about the long-term investment potential of these properties.
The Finance: Not only did our clients need buy to let SPV limited company mortgages to purchase the two properties, but they also wanted to capital raise the deposit money from an existing property. Although they technically had the cash available, they preferred to maintain cashflow within the core business for other investment pursuits.
The Challenge: Multi-property purchases are typically complex; however, this case threw up two unique challenges.
Firstly, our clients had tried to raise the capital they needed for the deposit as part of an incorporation process with another broker. However, due to various complications, this had not completed after six months and didn’t appear close to a resolution. The sellers of their new properties were, understandably, running out of patience and wanted a quick solution. Having dropped the original broker, we took on the case needing to find that fast solution and rebuild the clients’ trust in mortgage brokers!
Secondly, due to the timing issues, capital raising from the incorporation deal was no longer an option, so we had to find another solution. If suitable, we would usually look into releasing capital from a client’s residential home; however, it would be challenging to secure a lender for this due to their age and the level of borrowing required. Furthermore, their existing residential mortgage was on an incredibly competitive and historic variable rate which they didn’t want to give up. Consequently, we needed to think outside the box to make this deal happen.
The Solution: Drawing on years of complex buy to let mortgage experience, we proposed our client take a homeowner business loan on a second charge basis against their high-value residential home. This was only an option because they would use the money for business purposes and their existing residential mortgage lender was comfortable with a second charge being placed on the property. This flexible loan facility would cover the amount needed for the deposits, with some contingency built-in. We always recommend building in contingency with multi-property purchases, as a down valuation on one property can throw the whole deal into jeopardy! In fact, the semi-commercial unit and residential home were down-valued, meaning our clients needed that contingency to make the numbers work.
Our team worked extremely hard with the three lenders involved, our clients’ solicitors, and the sellers to move this case along. We drew on our connections with senior contacts within the lenders to ensure the urgency of this case was at the forefront of everyone’s minds. With constant communication and updates, we rebuilt the clients’ trust and secured the deal. We are now handling their larger incorporation deal in a separate case.
Property Details
Semi-Commercial Purchase
Property value: £1,135,000
Loan amount: £787,500
LTV: 69%
Rate: 4.99% 5-years fixed
Term: 10 years, interest-only
Mortgage payment: £3,190 per calendar month
Lender arrangement fee: 1.25% (inclusive of an existing 0.25% customer discount) (£9,843.75)
Rental income: £61,100 per annum
Gross yield: 5.3% per annum
Application: SPV Limited Company
Multi-Unit Freehold Block Purchase
Property value: £600,000
Loan amount: £479,965
LTV: 80%
Rate: 4.14% 5-years fixed
Term: 20 years, interest-only
Mortgage payment: £1,655 per calendar month
Lender arrangement fee: £1495
Rental income: £2,650 per calendar month
Gross yield: 5.3% per annum
Application: SPV Limited Company
Second Charge Home-Owner Business Loan
Property value: £1,750,000
Loan amount: £354,547
LTV: 60% (including the existing first charge of £700,000)
Rate: 7.49% 5-years fixed
Term: 10 years, interest-only
Mortgage payment: £2,212.96 per calendar month
Lender arrangement fee: 2.5% (£8,538)
Application: Individual
2nd August 2022
