As experienced property investors having built up equity over several years, our clients were hoping to capital raise on their multi-unit property, including a block of garages, to fund further investment.
At a glance:
- Capital raise for future investments
- Complex property structure, including garages
- Worked closely with client to prove suitability
The Case:
Our clients were experienced property investors, with a portfolio of both residential and commercial investment properties. Having built up equity over several years, our clients were hoping to capital raise against one of their properties to fund future investments. A multi-unit property comprising of two separate flats and a block of 24 garages, all on one deed.
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:
The Finance:
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
Next steps
Are you looking to secure a commercial buy to let mortgage? Head over to our easy-to-use buy to let mortgage calculator to compare rates or get in touch to speak with an expert commercial mortgage broker.
