The Client: An experienced landlord currently working and living as an expat in Dubai.
The Property: A flat above a commercial block of more than four separate units. The flat was situated on the sixth floor of the building, and located only a short distance from a popular city centre, ensuring sufficient demand from prospective tenants.
The Finance: Our client was hoping to expand their property portfolio within their Limited Company by purchasing this complex property. Sourcing the property finance for this purchase would make his portfolio more diverse and present our client as a much more proficient landlord.
The Challenge: There were three main challenges that we faced with this case. Firstly, as an expat in Dubai, we had access to a limited number of lenders. Sourcing a UK mortgage when living abroad can be difficult, and many lenders will go further and restrict the countries they are happy to offer to. Not only did we need to find a lender happy to lend to clients in Dubai, but we also had to present more documents to lenders, including UK and Dubai accounts, and proof that the mortgage repayments would come from a UK sterling-based account.
The second issue we faced was the complex property type. A flat situated above multiple commercial units will typically be harder to resell and may draw in less tenant demand, which concerns lenders as they want reassurance that they will be able to get their money back. Lenders are also usually wary about the type of commercial unit the property is above, and may be happy with, for example, a retail unit, but not a takeaway.
The final issue with this case was that the property had a tenant in situ at the time of purchase. This can cause challenges with lenders, as there may be different clauses in the tenancy agreement making it difficult to evict the current tenant. Similarly, a landlord selling a property with a tenant situ may be doing so as they aren’t a good fit, and may cause new owners issues in the long run.
The Solution: Our experience working with some of the most prominent specialist lenders in the buy to let space means we typically know which lenders will accept certain terms and which won’t. This client had worked with us on deals before, and we recognised that the key lender we had recently used for the client for a similar case would also be open to offer on this one. To ensure this would still be the best option, we had another quick research of the market but found no other viable options. Having previously received high-quality service levels from us and the lender, our client was more than happy to accept, and the lender issued the offer in just over two months. Here are the details:
Property value: £124,000
Loan amount: £94,162
Rate: 4.59% 5 years fixed
Term: 25 years interest-only
Mortgage payment: £ 364.48 per calendar month
Lender arrangement fee: £1,124.99
Rental income: £725 per calendar month
Gross yield: 7% per annum
Application: SPV Limited Company
25th May 2022