Complex Incorporation for Experienced Buy to Let Landlord

Complex Incorporation for Experienced Buy to Let Landlord

16.02.22 | Written by: Agata Lovelock (nee Rogozinska)

The Client: Our client was an extremely experienced landlord, with 22 properties owned in their own name.   

 

The Property: Located on the outskirts of the capital, the property was an ex-council flat, currently let as a four-bed HMO. With access to plenty of local amenities and transport into central London, it was a popular location for young professionals.   

 

The Finance: Our client was looking to incorporate the personally-owned property into his limited company. At the same time, he was looking to capital raise for further buy to let investment. Consequently, he required a limited company buy to let purchase mortgage at around 70-75% LTV.  

 

The Challenge: This case was challenging due to the property’s type and layout. Firstly, all flats in the block had deck access, which can be an issue for lenders as it can make the property more difficult to resell. Furthermore, the property also had a full flat roof, which is considered risky due to the possibility of water leakages.  

 

Secondly, a high proportion of the surrounding flats were still council-owned, rather than private. Some lenders require the block to be majority privately owned as, again, they believe it can impact resale potential.  

 

Thirdly, being used as an HMO restricted the number of lenders willing to lend on this case due to it being a more complicated property, especially considering the lack of communal space. Again, both aspects make it more difficult to resell and potentially less attractive to prospective tenants.  

Lastly, we’d have to approach more specialist lenders as typically high-street lenders won’t work on incorporation transactions, especially with a capital raise element.   

 

The Solution: From our whole-of-market access, we quickly identified a lender that did not require a block of flats to have a set percentage in private ownership to offer on it and would consider the other complications surrounding the type of property. Due to the number of bedrooms, the property didn’t require an HMO licence from the local authority, which the lender was happy to accept. Due to the deck access and flat roof, the lender capped LTV at 70%, but this was still more than enough for our client to repay their current loan and borrow extra in the purchase into their Limited Company. Here are the details:   

Property value: £325,000 

Loan amount: £227,500 

LTV: 70% 

Rate: 3.29% 5-years fixed 

Term: 25 years, interest-only 

Mortgage payment:  £633 per calendar month 

Lender arrangement fee: 1.5% (£3,412) 

Rental income: £2,370 per calendar month 

Application: SPV Limited Company 

Consultant: Agata Rogozinska, 01732 471602  

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

NB: 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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