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Multi-Unit Freehold Blocks for Property Investors

Multi-unit freehold blocks are becoming increasingly popular among property investors. This article aims to provide an understanding of what these blocks are. Their advantages and disadvantages and essential considerations when investing in them.

By understanding the ins and outs you can make well-informed decisions to maximise your property investment and development opportunities.

Definition:

A multi-unit freehold block (MUFB) is a single building that consist of multiple self contained individual units all owned by a single freeholder. The freeholder owns the whole building and is responsible for the maintenance and management of each unit and the common areas.

Lenders look at the size of each unit and if each unit has their own utilities. Criteria does vary considerably from lender to lender.

Advantages:

  • Diversification: Investing in MUFBs allows investors and developers to diversify their property portfolios, spreading risk across multiple units and tenants.
  • Economies of scale: Managing and maintaining multiple units within a single block can be more cost-effective due to shared costs and resources.
  • Attractive rental yields: MUFBs usually often offer higher rental yields compared to single-unit investments, making them more lucrative for investors.
  • Capital growth: Well-located and well-managed MUFBs may experience strong capital growth over time, providing long-term value appreciation but there is no guarantee.
  • Reduced void periods: With multiple units in one building, the chances of all units being vacant simultaneously are lower, providing more consistent rental income.

Disadvantages:

Management complexity: Managing a MUFB can be more complex than managing single-unit properties, requiring expertise in tenant relations, legal compliance, and building maintenance.

  • Illiquidity: Selling a MUFB may be more challenging due to a reduced pool of potential buyers, making it a less liquid investment compared to single-unit properties.
  • Concentration risk: Although MUFBs offer diversification within the block, investors may face concentration risk if their entire portfolio consists of MUFBs in a single location.
  • Financing challenges: Obtaining financing for a MUFB can be more difficult than for single-unit properties, as lenders often have more stringent lending criteria for multi-unit investments.
  • Legal and regulatory challenges: Developers and investors must navigate complex legal and regulatory requirements when converting or developing MUFBs, which may require specialist advice and support.

In conclusion, investing in multi-unit freehold blocks can be an attractive option for property investors and developers.

It is essential to weigh the advantages and disadvantages, conduct thorough due diligence, and seek professional advice before making any investment decisions.

By understanding the complexities of MUFBs, you can take advantage of the potential rewards they offer while mitigating the associated risks.

Don’t miss out on the opportunity to maximise your property portfolio’s potential.

Contact us today to schedule a free, no-obligation consultation and discover how we can help you unlock the full potential of multi-unit freehold blocks.

Case Study for New Build Flats

A Cheshire based company had built four apartments with total land and build cost of £200,000 and the properties were valued at £440,000.

Lenders had been approached by our clients and all were either not interested as they were property developers, or wanted them to leave some of their money in the project so they only had had access to a maximum loan of £180,000. This was seriously going to affect their future projects and expansion plans.

By getting to know their medium and long-term strategy we presented this to a specialist property lender. By outlining their plans the lender was satisfied that the company had a long-term viable plan which they wanted to support and offered 75% of the value to them. So we have two happy directors who now have an extra £150,000 to go towards their next project.

Searchlight Finance Ltd is a broker not a lender.

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We are a credit broker not a lender.

Searchlight Finance Ltd is registered at 98, King Street, Knutsford, Cheshire, WA16 6HQ. Company Register number is 07929050.

Authorised and Regulated by the Financial Conduct Authority. Our FCA registration number is 743220. You can check via www.register.fca.org.

We are registered with the Information Commissioner’s Office, Z3109319 and you can check via www.ico.org.uk.

We conduct both regulated and unregulated business and therefore not all products provided through us are regulated by the Financial Conduct Authority.

We source finance from the whole of market and may receive commissions that will vary depending on the lender, product, or other permissible factors. The nature of any commission model will be confirmed to you before you proceed.

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