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BTL Portfolio Restructure Accountants Advice

 

Today I have come across one of the worst structures implemented by an accountant for a BTL landlord I have seen. The client owns properties personally and he has been told to put all rental income through a limited company and then create a deed of trust as part of this process.

This documentation is not done correctly, so now the land registry, tenants and lenders think he owns them personally, HMRC only sees rent through the limited company and the deed of trust shows that he and the company own the properties 50-50!

As well as being in breach of his mortgage conditions, he can no longer refinance his BTL mortgage portfolio or buy any more property. What’s worse for the client is the accountant is a family friend, so I envisage many awkward conversations ahead.

Before you do any restructure I recommend that you talk to a chartered tax accountant who understands the property market and then once you have the options, either speak directly to your lender or a broker who understands the BTL market. You can find out how the lenders will view your options and you won’t lose sleep at night because of what your accountant has done.

We know what the lenders like and don’t like, so are happy to help you with your BTL mortgage restructuring plans.

Auction Finance up to 75% LTV

Valuation and solicitors instructed same day with a fast track legal process to reduce the stress. All the lender asks, is that you have completed one previous project.

Daily interest, no exit fees and some of the best rates in the market. Also covers light and heavy refurbishment.

Contact us for a quote.

Light Refurbishment Finance

Has your BTL mortgage been refused due to the condition of the property?

Improve the value and the rent on a tired property. Whether it be a new kitchen, bathroom, damp, electrics we have lenders for all of them at competitive rates up to 85% LTV with experience and 75% without.

Contact us for refurbishment finance options.

Light Refurbishment Bridging on Property & Costs

Shawbrook initially launched this light refurbishment product to a limited panel including Searchlight.  Now, normally you would fund the costs out of your own money, which can limit the number of projects you do.

Shawbrook will provide additional borrowing as long as:

Maximum initial loan 75% of lower of the purchase price or value. The total loan including purchase is not higher than 85% of the initial purcahse price or 70% of the end value.

A recent example for an experienced developer.

Purchase Price £150,000
Costs to refurbish £45,000
End Value £260,000

What happened

Day 1 loan of £112,500 – 70% of the end value is £182,000 and 85% of purchase price is £127,500 so maximum total loan based on the lower figure is £127,500. Deduct the initial loan of £112,500 and the developer has an extra £15,000 from the lender towards their build costs. This was put towards another purchase which previously they could not afford.

Commenting on this significant development, Emma Cox, Sales Director, Shawbrook Commercial Mortgages;

“We have worked tirelessly over the past five years to improve this important element of our product offering, and 2018 represents a real success story for the Shawbrook STL range. The ability to borrow 100% of refurbishment costs under one facility can be critical for investors looking to add value and develop their portfolios, and we are delighted to be able to support this activity.”

“While the product range continues to evolve in response to market demand, we have managed to keep all the old benefits in place to help our brokers and their customers build for the future. The 0.25% discount remains available for repeat borrowers with no minimum interest periods or ERCs, and we are also pleased to retain a great deal of flexibility for borrowers with the maximum 24-month term providing time to refinance or sell.”

£330,000 refinance from a bank that says No

Due to their withdrawal from the market their existing lender had given notice to a long established Lancashire property company to move it’s property portfolio to another bank or sell.

The directors were in their 80’s and spent most of their time overseas and didn’t own a main residence in this country. To add to this their tenants received housing benefit which most of the banks didn’t like.

We kept in constant contact with the outgoing lender and updated them at every stage. This gave the bank the confidence to grant extra time in a complicated restructuring.

Never to back away from a challenge we arranged with the directors for a UK based relative to become a director. This gave a new bank comfort in succession planning and where other brokers had failed we obtained the finance needed. The properties have been retained giving the clients a comfortable income in their well-earned retirement.

Refurbishment Loan with lender funding up to 100% of refurbishment costs

Criteria

Initial Loan 70% of the value
Refurbishment costs 100%
Gross facility up to 70% of end sales value
Loan size £250,000- £1.5m
Term – up to 18 months
Minimum value £300,000
Works lower of 50% of current value or £500,000
Experience essential

Suitable for

Extensions
Conversions
Planning
Permitted development
Heavy refurbishment
Structural works

Auction Finance at 75%

Yes 75%. Valuation instructed same day and a fast track legal process to reduce the stress. All the lender asks is that you have at least two rental properties.

Contact us now to get your purchase agreed.

 

Time to change banks?

I deal with the Bank’s every day and its clear there is a huge difference in what they say in the media and what they do. They keep banging the drum that they are open for business and they have money to lend. But do they want to lend? Yes they do but you now have to work at getting the funding.

I see three main issues with the lenders:

1. Managers who don’t understand business – most of the experience has gone
2. Faceless underwriters who are scared in putting their name on a “YES-we will agree this one”
3. They don’t have as much money as they use to so the quality line has gone up.

On the positive side, it is getting better and more lenders have entered the market.

To maximise your chances of getting the funding:

1. Keep them informed on a regular basis-they don’t like surprises
2. Treat them as a shareholder
3. Tell them about your future plans and not just the past
4. Draw up a business plan. It can be just 1 page
5. Show them numbers – they like numbers. As well as your last annual accounts show them current figures as well
6. Advise them in advance of any cash flow issues. You are more likely to get it paid
7. Find out how your manager is targeted – see how you can help them

At Searchlight we have strong relationships with the lenders so if your current lender says no contact us to see how we can help.

Bridging Finance – How strong is your exit route?

Do all lenders care about the exit?

Not wanting to be too controversial but various cases have led me to the conclusion that not all lenders look in detail on how they are going to get repaid. I must stress it is some and not all.

Being the rare breed that I am of broker, landlord and experience of running a bridging company, the exit does concern me. Now three cases were all presented by other brokers to lenders with repayment coming from a remortgage. All had major holes in that strategy and the risks were never explained to the client by either the broker or the lender.

1. A six-month loan at a low rate when the client needs nine months. To extend costs far more than a nine-month term with another lender.

2. A remortgage to a limited company whose main director/shareholder had adverse credit as long as your arm but the broker put the exit down as a remortgage and the lender never checked.

3. A valuer saying there was asbestos in the property but no specialist report being requested.

4. A recent case has got me thinking about how little due diligence is done by some lenders on the exit. We have another broker introducing Steve to a bridging lender to convert a guest house into an HMO. The deal gets done, refurbishment goes to plan and after several weeks of the client not getting the exit I get the call to sort out the repayment. Steve meets the criteria of the HMO lenders.

I ask him about planning and he tells me it has established use. I say prove it as that’s what the lender will need. He then comes back to me and says it doesn’t have planning and has to apply for it. So he has spent his money on a property that has planning for a guest house. Now he admits he missed it but this was never discussed by the lender or the broker. Surely their solicitors knew as well?

What does that mean to the bridging lender? Well the cynic in me says another two-three months of receiving interest and the bigger cynic the possibility of default interest. Now I hope I am wrong but I can’t see any reason why the lender did not identify this and bring it to the client’s attention.

Now that’s four cases where their broker gave them a product that was never going to work. Clients weren’t aware of it and it has cost them all financially, never mind the stress and anxiety.

At Searchlight, we work on the exit first and if it can’t be provided by multiple lenders we won’t do the bridge.

Contact us now to see how we can help you as we don’t expect this product to be around for long

 

One of our Buy to Let Lenders

• No limit on number of properties owned

• No limit on background mortgage amounts

• No minimum income for existing landlords

• Existing landlords don’t need to be owner-occupiers• Loans up to 80% LTV

• Maximum age 85 for repayment

• Professional Landlords and Developers welcome

• Property Income accepted

Contact us now to see how we can help with Buy To Let

All products are aimed at UK business BTL landlords and subject to underwriting. Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured upon it.

Precise Mortgages

Good to see Precise Mortgages will be entering into the HMO and limited company BTL market later this week. As a broker the existing HMO lenders I deal with need new competition so looking forward to seeing the rates from a lender who is very competitive.

Lenders using the same language

It’s always been difficult to compare fees when lenders use different words for their costs. By early 2016 most lenders should have a “tariff of charges” in place that will be in a standard format. They will also be in the same order in their promotional literature.

This follows a Which? campaign and will make it easier to understand and compare.

Buy to Let Light Refurbishment Finance up to 80% LTV

Refurbishment Finance is not for everyone as there is strict criteria but it does show there can be an alternative to bridging.

For a property that requires a level of light refurbishment which doesn’t involve any structural work or change in planning then it’s a very cost effective way of adding a property to your portfolio.

You have to be an existing property owner and with some lenders a landlord. The initial loan is based on the lower of the valuation or purchase price. The valuer also estimates a valuation and rent figure after the work has been completed and the final loan is based on these figures. The difference between the two loans is retained by the lender until the work has been satisfactory completed.

You do the work normally within three months and you need savings to cover the mortgage payments for that period. Once the work is finished the valuer reinspects and if all OK the retention is released.

The minimum property valuation is £100,000 and as with all lenders you need to be in receipt of income that is provable.

If you need to complete quickly or you need help with the refurbishment costs then bridging finance may be the answer.

Refurbishment BTL products

Anytime I get asked for bridging I ask is there an alternative? If you don’t have to complete quickly and the property has a kitchen and bathroom there may be BTL refurbishment mortgages out there as an alternative.

It is provided in two amounts.  The lender will provide a loan of up to 80% of the lower of the purchase price or valuation. The valuer is provided with a detailed schedule of works and they provide an after works valuation along with a rental figure. The lender will base their end loan on the completed value and rent. The difference between the two is retained by the lender (retention).

The work is completed and the valuer does a re-inspection. If the after works valuation is confirmed then the retention is released to you.

If you are looking to convert a property into an HMO then with experience you have access to a specialist HMO refurbishment mortgage or you use cash or bridging finance.

BTL products we have access to

We have direct access to lenders that will consider:

  • Limited Company applications
  • Single Freehold split into multi units
  • Multi Lets
  • HMOs of all sizes
  • Portfolio Finance
  • Student Tenants
  • DSS/LHA Tenants
  • Retail with flats above
  • Rental valuations
  • No minimum income
  • Limited Company applications
  • Pension and Trust applications
  • Professional landlords
  • Adverse credit
  • Ex Pat applications
  • Foreign Nationals

Lenders with no minimum income

You need an income which is provable to cover your overheads but unlike a lot of lenders there is no minimum.

It’s particularly suitable for professional landlords who have carried forward losses due to past refurbishments or developments.

Or when income has fluctuated due to improvements or tax planning.

 

Ex Pat BTL Mortgages

We have lenders for UK nationals residing outside of the UK, providing you have a relevant satisfactory UK financial track record and other UK property assets.

You need;

  • UK bank account
  • a minimum of two UK investment properties with at least one mortgage outstanding
  • Independent personal income to support your other financial commitments
  • In a position to withstand interest rates rise or any tenancy voids

We are happy to consider applications from experienced investors up to a maximum of 75% LTV.

80% Buy to Let Lender

Saffron who have a really competitive refurbishment product has dropped its minimum income requirement .  You have to go via a very limited panel of mortgage brokers to access this and we are proud to be one of these. They will lend up to 75% on refurbishment and also 80% on standard buy to let loans.

No HMO’s or limited companies and loans up  to £500,000.

 

Searchlight Finance Limited is registered in England and Wales No.07929050 Searchlight Finance Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (http://www.fca.org.uk/register) under reference 743220. The FCA do not regulate Business Buy to Let Mortgages or most Commercial Mortgages and Bridging Finance. ICO Number Z3109319. Your property may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it.

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