An experienced portfolio landlord currently working as an estate agent, our client was seeking finance for the purchase of a mixed-use block comprising of both commercial and residential that he could also use as a base for his own business.
At a glance:
- Purchase of mixed-use property comprising of retail and residential
- Part buy to let, part owner-occupier for our clients own business
- Overcome the challenge of disparity between valuation and listing price
The Case:
We were delighted to work with an experienced portfolio landlord, currently working as an estate agent. As a young entrepreneur with multiple business interests, our client had substantial experience in the property market. Our client was seeking finance for the purchase, with the primary goal to secure the position of their estate agency in the town centre.
The property was a mixed-use block consisting of two commercial units, and two one-bedroom flats. Whilst one of the commercial units was empty, our client already rented the other for his estate agency business. With close proximity to other shops and local amenities, the two flats attracted high rental demand.
The Challenge:
The valuation for the property came in at £180,000, significantly lower than the purchase price of £250,000. Unfortunately, our client didn’t have all the additional cash available to compensate for the purchase price difference. Furthermore, the seller was unwilling to negotiate the purchase price, so we had to attempt to source the remaining funding using makeweight security in the form of a second legal charge over his private residence.
The Solution:
Despite the disparity between the valuation and the listing price, a couple of elements reassured the lender. Firstly, the two flats were already let out, at £613 per calendar month, ensuring immediate rental income for our client on completion to go towards the mortgage repayments. Secondly, our client had sourced a tenant to rent out the empty commercial unit, again securing further guaranteed income for our client.
Fortunately, our client had significant available equity in his residential home, so the lender decided they were happy to take a second charge loan against our client’s residential property. Keen to secure the commercial unit for his estate agency business, our client was happy to proceed.
Here are the details:
The Finance:
Property value: £250,000
Loan amount: £212,135
LTV: 85%
Rate: 5.59% 5 years fixed
Term: 15 years, interest-only
Mortgage payment: £988.20 per calendar month
Lender arrangement fee: 1.50% (£3,182)
Rental income: £22,980 per annum when all elements are let
Gross yield: 13% against valuation (9% against purchase price)
Application: SPV Limited Company
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.
