Capital Raise on Complex Semi-Commercial Property Block

Capital Raise on Complex Semi-Commercial Property Block

04.05.22 | Written by: Peter Barnes

The Clients: Experienced property investors, with a portfolio of both residential and commercial investment properties.

The Property: A multi-unit property comprising of two separate flats and a block of 24 garages, all on one deed.  

The Finance: Having built up equity over several years, our clients were hoping to capital raise against this property to fund future investments.

The Challenge: Lenders were initially uncomfortable with the property as a source of deposit due to its complex structure and the block of garages. As the whole property was on one deed, lenders acknowledged that it would be a very difficult asset to resell in the event of repossession, as it’s much easier to sell one flat rather than two on one title.

Similarly, garages tend to be unpopular with commercial lenders as they can be difficult for landlords to manage. Typically with yearly contracts, tenant turnover can be high, leaving property owners open to void periods and a loss of income. Both of these factors reduced the number of lenders that would be happy to offer on the case.

The Solution: Through our knowledge and experience in the commercial market, we anticipated lender hesitation with this case and prepared for challenges in advance. Many properties in the surrounding area lacked garages of their own, which meant that the units were in constant demand. Similarly, the flats were popular with commuters due to the ideal location. This meant we were able to prove substantial income from not just the garages, but the whole property. With all of this information available, we sourced a lender happy to continue, and our clients were able to purchase another investment property. Here are the details:

Property value: £450,000

Loan amount: £270,000

LTV: 60%

Rate: 4.30% 3 years fixed

Term: 10 years, interest-only

Mortgage payment:  £ 982.12 per calendar month

Lender arrangement fee: 1.5% added to loan

Rental income:

Residential flats: £18,000 per annum

Garages: £24,000 per annum

Gross yield: 9.3% per annum

Application: Individual

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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