The Client: An experienced landlord looking to expand her property investment portfolio.
The Property: A three-bedroom mid-terraced house that our client already owned. Situated in a quiet, residential town in the southeast of England, the property maintained a high rental demand.
The Finance: Looking to capital raise against this existing property, our client intended to use the funds generated as a 25% deposit towards a new property for her portfolio.
The Challenge: Our client already received £1,200 per calendar month from the property, and needed this level of rental income to maximise the deposit for her next investment. However, we faced a substantial challenge when the rental valuation for the property came back at just £950 per calendar month, limiting the loan amount significantly to lower than she needed. This meant we would need to appeal the valuer’s decision in order to meet our client’s demands, which can be particularly difficult. If our client couldn’t raise the full deposit amount, she’d have to start her search for a new BTL property again with a smaller budget; something she didn’t want to do.
The Solution: Our experience in the buy to let market meant we knew how best to approach rental valuation difficulties. As there were no issues with the property valuation, we quickly identified that the way to overcome this challenge was to justify to the lender the rent our client was charging. It’s important to note that appealing any type of valuation can be time-consuming, and in the vast majority of cases, they are unsuccessful. Just as in this exceptional case, it was our client’s responsibility to research and source three examples of identical properties within a ½ mile radius that had been rented out in the last six months. Fortuantely, in this case, the report was amended by the valuer to our initial rental price. Our client was therefore eligible for her desired loan amount, and was happy to proceed. Here are the details:
Property value: £275,000
Loan amount: £206,250
Rate: 2.59% 5-years fixed term
Term: 25 years, interest-only
Mortgage payment: £445.16 per calendar month
Lender arrangement fee: Free
Rental income: £1,200 per calendar month
Gross yield: 5.23% per annum
6th July 2022