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Posts Tagged 'portfolio landlords'

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.

Top 5 Tips for the Right Buy-to-Let Mortgage

Securing the right buy-to-let mortgage is a critical step in building a successful property portfolio.

In this article, we’ll discuss the top 5 tips for choosing the right buy-to-let mortgage to help you make an informed decision.

Know your borrowing options


Before diving into mortgage deals, familiarise yourself with the different types of buy-to-let mortgages available, including fixed-rate, variable-rate and tracker mortgages.

Each type has its pros and cons, so understanding your options will help you select a mortgage that aligns with your investment goals and risk tolerance.

Compare mortgage deals


Don’t settle for the first mortgage offer you come across. Instead, compare deals from multiple lenders, taking into account interest rates, loan terms, and repayment structures.

Working with a mortgage broker can help you find the best deal for your circumstances as not all products are available directly with a lender.

Consider your investment strategy


Your buy-to-let mortgage should align with your overall investment strategy. Are you focused on long-term capital growth, or do you prioritise high rental yields?

Depending on your goals, you may opt for an interest-only mortgage to maximise cash flow or a repayment mortgage to build equity over time.

Assess mortgage fees and charges


When comparing mortgage deals, be sure to factor in additional fees and charges. These include arrangement fees, broker fees, valuation fees, and early repayment charges.

These costs can impact the overall cost of your mortgage, so it’s essential to account for them when evaluating potential deals.

Plan for future market changes


While it’s impossible to predict the future, it’s crucial to consider how future market changes may impact your buy-to-let mortgage.

For instance, rising interest rates could increase your monthly repayments if you have a variable-rate mortgage.

Ensure you have a contingency plan in place to manage potential risks and safeguard your investments.

By following these tips, you can secure a mortgage that supports your goals and contributes to the long-term success of your property portfolio.

Don’t leave your buy-to-let mortgage decision to chance.

Reach out today for personalised advice and support in finding the perfect BTL mortgage for your property investment needs.

Contact us now to get started on the path to success in the buy-to-let market.

BTL Mortgages

How to Choose the Right One for Your Property Portfolio

Finding a buy to let mortgage can seem like a daunting process, but with the right advice and guidance you can get the BTL mortgage you need. Here are some tips on how to get started:

Do your research

Before you start anything, make sure you have done your research. There are a lot of different buy to let mortgages available, so it’s important to find the one that’s right for you.

Get pre-approved

Before you go ahead and apply for a buy to let mortgage, it’s important to get pre-approved by a BTL mortgage broker. This way, you know you’re eligible for a mortgage.

Talk to a mortgage broker

A good broker who does BTL every day should be interested in your plans and future strategy. They will be able to help you understand the process and find the right mortgage for you.

Compare rates and costs

Once you’ve decided on a mortgage, it’s important to compare rates and all the costs as it’s not just about the headline rate.

There are a lot of different lenders out there and most are only available to mortgage brokers, so it’s important to find one that’s right for you and the property.

Get a mortgage

Once you’ve decided on a lender and have your documents ready, it’s time to get a mortgage. Make sure you have all the documents your broker has requested and be prepared to answer any questions the mortgage provider may have.

Finding a buy to let mortgage can be a daunting process, but with the tips outlined in this article, you should get the mortgage you need.

If you have any questions or would like help with finding a buy to let mortgage, please contact us.

When can bridging finance be used?


Standard bridging is ideal for customers looking to secure the purchase or refinance of a residential or investment property
including:

Chain break – whilst waiting for an additional property sale
Raising funds for short term requirements
Auction purchase
Capital raising for any legal purpose
Meeting tight transaction deadlines

Light refurbishment:

Light refurbishment is used where short term finance is needed for items such as:

  • Modernising properties
  • Replacing kitchens and bathrooms
  • Properties deemed uninhabitable/unletable by long term lenders

Heavy refurbishment:

Heavy refurbishment is where you may require short term finance for works that require building regulations or planning permission.This could help with:

  • Conversion and reconfiguration of residential property
  • Commercial to residential
  • Completing a development that is wind and water tight
  • Extension, loft conversion and basement digs

What is a small HMO to a lender?

• A HMO with C4 planning use specifically relates to smaller HMOs

• The classification of C4 originates from C3 with the added benefit of permitted development.

• Permitted development allows for a change of use from C3, up to a maximum of 6 occupants, without a full planning application as long as there is no Article 4 direction in the area.

• Valued on a “vacant possession” basis by most lenders: the property is valued in its present condition with full benefit of vacant possession. The surveyor uses comparable evidence to support the valuation figure.

• Article 4 is whereby the local authority is looking to restrict the number of HMOs and restrict permitted development in a geographical area

• This may affect the valuation in the sense that if a HMO has the benefit of planning in an area then there is a value in the scarcity of the HMO

• Valuers confirm whether a property sits within an A4D area, and if so, how much proportion of the MV is in essence ‘scarcity value’

£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.

Multi Unit BTL Mortgages

What is it?

A freehold property split into self-contained flats. Make sure it has the correct planning permission if it has been converted and building regulations. Lenders want each unit to be greater than 30sqm and to have their own utilities.

These can be as simple as a terraced house converted into two self-contained flats or a new build on one freehold title split into multiple flats.

We have a wide range of BTL and specialist lenders which can provide options for all types of multi-unit BTL mortgages.

Bridging Finance Risks

I deal with bridging finance risks on a daily basis. Like everything in life the vast majority of lenders and brokers are perfectly acceptable and do a good job but there are a few issues that not everyone is aware of.

There is a lot of paperwork and you can’t always easily compare one lender to another. You might be under pressure financially or need to complete quickly.

Always make sure you know what you are signing and pay particular attention to the points below. This list is not exhaustive but the main points to consider. If in doubt talk to a reputable broker who has experience in bridging and your own solicitor.

The term of the loan. If you can’t apply for a remortgage until you have owned a property six months then why is the loan six months or less? On average it takes 6-8 weeks to complete a remortgage so the term should be at least nine months. Is it so the lender can charge you extension fees or default interest? Or that the transaction hasn’t been explained to them fully?

Interest – Monthly or daily. Loan set up 7th October and repaid 7th December. That’s 2 months and one day or three months depending on who the lender is. At an average margin of 1% that can be a lot of money.

Retained, rolled up or serviced. The latter is straightforward in that you repay the interest each month when it falls due. Retained is when you borrow from the bridging lender the interest payments due on the loan. If you have a six-month loan then the total of these interest payments are added to the amount you wish to borrow. Rolled up is when interest is added to the loan each month and you pay interest on that amount. There is a vast difference in the total cost when looking at these alternatives.

Changing the rate during the application. The rate you get offered should be the rate you pay unless there are issues with the valuation or additional information comes out during the process that increases the risk to the lender. Some brokers offer headline rates to get you interested which are never available

You have a loan for eight months and repay after three. Interest has been retained so you are expecting five months back. With some lenders, you won’t – they keep it. Always ask what happens when repaid early.

Don’t be swayed by the rate. Add all the costs up to compare including valuation.

Exit fees, admin costs etc. Make sure you know everything that is being charged.

Default interest. If you are late paying then rates can stay the same go up to 48% or worse. Some lenders even backdate this!!. Always ask what their policy is if the loan is late being repaid

Reputation. Don’t be swayed by FCA or any other membership. It’s no guarantee that you will get the best terms

And the worst to last. You or your broker should start on how the bridging loan will get repaid and obtain evidence of that, an agreement in principle etc. I regularly see loans taken out that don’t have this. It is usually either a remortgage or sale. Don’t enter into a loan unless you have more than one option to repay it.

Please go we don’t want you!

We all understand why property is not flavour of the month for some lenders who have historic bad debts and we are seeing many long established landlords having their funding lines cut from certain lenders.

I have seen 40 year connections told, please repay we don’t want you any more.

It’s important you have a lender who understands property, has a good reputation and is clear and transparent about credit policy.

Thankfully there are banks that are open for business and more are coming into the sector.

How do you calculate bridging interest?

I’m surprised how many just focus on the monthly rate. The way interest is charged is equally as important as it can make a big difference in how much you pay.

Firstly you should have been made aware of this before the application stage.

There are three ways for lenders to calculate interest:

Serviced

This is when you will pay a monthly amount calculated on the interest rate so no deductions are taken from the loan to cover the interest for the period. Some lenders do not offer this facility and the ones that do require proof that you can make these repayments from your income.

Retained interest

An amount which covers the total number of monthly interest payments and the setup fee is deducted from the initial loan. With some lenders, you can choose the number of months that are retained and service the rest. The retained interest is still part of the amount that you borrow so interest will also be charged on this amount by the majority of the lenders. This way at the end of the loan you will not exceed the lenders LTV.

Rolled up interest

This is a better way of calculating interest and again is aimed at borrowers who are not able to make the monthly interest payment. Interest is compounded which reduces the overall costs.

BTL products we have access to …

We have direct access to lenders that will consider:-

  • Limited Company applications
  • Single Freehold split into multi-unit
  • Multi Lets
  • HMOs of all sizes
  • Portfolio Finance
  • Student Tenants
  • DSS/LHA Tenants
  • Flats above shops, restaurants
  • Rental valuations on HMOs
  • No minimum income
  • Limited Company applications
  • Pension and Trust applications
  • Professional landlords

Financing a Flip

 

A flip is buying a property and then selling quickly, hopefully at a profit. It may be a refurbishment to increase the value or you may just be trading property. There are only two ways to finance these:

Cash, which may be from a remortgage of another property
Bridging Finance

Don’t use a mortgage to finance them as it will seriously affect your future prospects of getting a mortgage. Lenders look at your credit file to see when mortgages are taken out and repaid. If you are using BTL mortgages for this type of transaction don’t as you are using long-term money for a short-term purpose and it’s mortgage fraud.

Buy to Let Light Refurbishment Finance

Refurbishment Finance is not for everyone as there are 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 landlord and you are buying the property personally to get these rates. 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 also 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, the value is lower or you need help with the refurbishment costs then bridging finance may be the answer.

 

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.

Member of National Association of Commercial Finance Brokers (NACFB).