Tag Archives: property value

Barry’s story – it could have been you! Financial Advice, Landlord News, Latest Articles, Property News

Barry’s story was written by the Mark Alexander back in December 2010. It has since been updated and re-published several times. The dates, times and people are fictional but the story is based on real life events.

It’s a modern update of the classic “A Widow’s story”, this time written as a cautionary tale for landlords and their families.

Barry is 53 years old and married to Sharon. They have three teenage children; twin girls aged 15 and a 13 year old son. Barry worked as a self employed salesman in the plant hire business. Sharon had a part time secretarial job in a local school.

Barry and Sharon purchased their first investment property in 1996.

As property values have risen they have continuously remortgaged and used a proportion of the equity released as deposits to purchase additional rental properties. They also saved a proportion of the equity released for a rainy day. To accelerate the growth of their portfolio Barry and Sharon raised extra cash for deposits by remortgaging their home. The profits from Barry’s plant hire business covered the family’s commitments comfortably.

They had accumulated a portfolio of 23 properties with a combined valuation of £1,650,000, against which they had mortgages of £1,400,000.  The portfolio produces rental income of £87,000 per annum. Their rainy day fund amounted to just over £64,000. By having all of the above in place you might be forgiven for thinking that they had set themselves up with a very safe future.

On Sunday 21st December Barry had a bad day. He was on the way home that evening having just been out to fix a tenants leaking shower tray when the traffic on the M6 came to a grinding halt. Barry managed to stop his car, avoiding the lorry in front of him, but the car behind him ploughed into the back of him, wedging his car under the back of the lorry.

The emergency services managed to free Barry from the wreck and his only damage was shock, whiplash and major bruising to his legs. However, two days later Barry collapsed whilst out shopping for last minute Christmas presents. He was rushed to hospital where it was discovered that a blood clot in Barry’s leg had passed to his brain. Barry had suffered a major stroke.

He lost his speech and most of the use of one side of his body. The family were in tatters. Sharon had to give up work to care for him.

Up until having a stroke Barry had managed the property portfolio and taken care of most of the maintenance himself. Could Sharon care for her husband, her family and the management and maintenance of the property portfolio too?

They considered putting the properties on the market but soon realised that after deducting selling costs and CGT there wouldn’t be much money left over. They would also lose their income and they would be leaving their tenants in a difficult predicament too. Sharon has had to employ a lettings agent to manage the portfolio. Since then it has cost the family an average circa £3,000 a month to pay for ongoing maintenance and management.

Fortunately there has been some good news, at least financially. First, low interest rates have meant that Barry and Sharon’s mortgages have got much cheaper than when they started their property rental business. Many of their mortgages have reverted to tracker products due to their fixed rates coming to an end. They are focussing on Barry’s recovery. What will happen when interest rates go back up again though? How will the restrictions on finance cost relief for individual landlords affect them?

The real saviour for the family has been insurance. Fortunately, Barry and Sharon were astute enough to insure against these eventualities. They took out life assurance policies that pay out a regular monthly income right up to Barry’s 65th birthday. These policies were written on the basis that they also pay out in the event of a critical illness. The family are therefore confident that these provisions will see them through these troubled times and out the other side. They will then revert to plan A, which was to live off surplus rental income over and above the mortgage payments on their portfolio or to sell the properties and live off their gains.

What insurance provisions have you made for your family?

How are you investing the windfall of increased cashflow that record low interest rates have produced for your family?

Have you made similar provisions to Barry and Sharon?  If you haven’t it may not be too late, we want to help.  If you have already taken advice and put insurances into place we would like to introduce you to one of our recommended advisers to review your policies and ensure they are competitive. Most important of all, to ensure that the right person gets the right money at the right time.


Tax Treatment of Equity Loans for Buy to Let Landlords Advice, Buy to Let News, Commercial Finance, Financial Advice, Landlord News, Latest Articles, Legal, Mortgage News, Property Investment Strategies, Tax and Accountancy, Tax News, UK Property Forum for Buy to Let Landlords

I have been posting on numerous forums about the introduction of equity loans into the UK buy to let mortgage market, a common question is the tax treatment.

Equity loans do not attract interest in the normal way, there are no regular monthly payments. One UK lender, funded by USA equity house JC Flower & Co. (a leading financial services investment company with funds in excess of £5billion) has entered the UK market and others may follow. Their return on investment is earned when the loan term expires or or sale or refinance of the property, whichever is sooner. Their return is capital plus a share in capital appreciation equal to double their investment. For example, if they provide top up finance of 10% of a property value their return with be 20% of the increased capital value plus their investment when the funding is redeemed.

As you may know, I was previously a former commercial finance broker. When I was practising I was renowned for digging into complex funding, tax and legal structures to explore opportunities and threats which others may never have considered.

Note to all – I no longer provide advice and this post must not be treated as advice.

The tax treatment of the redemption of BTL equity loans will be very interesting.

Let’s use this example. Equity loans can sit over and above traditional interest bearing mortgages but for the sake of simplicity I have based the following example on equity funding only.

Property value at outset £100,000
Equity loan at outset £20,000

Property value at sale £200,000
Capital gain £100,000 (or is it and if so how is it shared? – see below)
Equity loan capital repaid £20,000
Profit on Equity loan to lender £40,000

Now does the £40,000 profit on the equity loan to the lender reduce the owners capital gain to £60,000 or is the owners gain still treated as £100,000?

The lender operating the first of these schemes has already stated they will bill their return as interest at the point of loan redemption. However, that’s not to say HMRC will see it that way, only time will tell. Therefore, my suggestion to all landlords considering this type of finance is to plan for the worst and hope for the best in terms of tax treatment. As has been proven many times, the law says you can call something pretty much whatever you like but case law or legislation will determine what it really is. Case in point, advance rent or deposit? – see Johnson vs Old

So will profits made by equity lenders need to be used to offset rental profits? If so there could be a substantial paper loss created in the year of redemption. Unused losses may be rolled forward, assuming losses are made, but such losses are only offsettable against future rental profits. No problem, in fact potentially very advantageous, IF you continue to make rental profits going forward. However, if this was your only property you may be stuffed by having to pay CGT on the full £100,000 of gain and not being able to utilise the carry forward losses. Note that rental losses can not be used to reduce other taxable income.

I can’t see HMRC allowing landlords to choose how they apply the lenders return to suit their individual circumstances, i.e. as either interest or a share of capital gain,  but we can live in hope, not that that’s a good strategy of course! If HMRC do allow a choice to be made that would be utopia from a tax planners perspective 🙂

What I would suggest to all considering equity loans is that they should plan for the worst case tax scenario and hope for the best case tax scenario. In other words, make decisions based on the worst case tax scenario and if that works then fine. Obviously there are many other aspects of the deal to consider too which is why I am an advocate of taking professional advice as opposed to taking a short sighted approach and simply jumping into deals unadvised just to save initial fees.

If you are a portfolio landlord who makes good rental profits then treating the lenders return as interest could be extremely tax advantageous if the tax regime remains as it is today. This is because income tax rates are greater than capital gains tax rates for higher rate tax payers.

Therefore, for landlords who will continue to make rental profits, post redemption of their equity loans, this is particularly attractive in my opinion. At worst, if HMRC decide to treat the lenders returns as capital gains, landlords will pay a lower CGT bill and not be able to offset interest. For a landlords with no ongoing rental profits post redemption of an equity loan, having the lenders return treated an interest charge is highly unlikely to be attractive whereas having the returns treated as capital gains will be far better for them.

If, of course, your equity loan is secured against your private home then no CGT is payable on sale anyway.

Tax Treatment of Equity Loans for Buy to Let Landlords

Tax is not the only consideration.

I have listed 11 good reasons for considering the product and 9 downsides in my main post about equity loans. That’s not to say that everybody should think equity loans are the best thing since sliced bread just because my list of pro’s and cons is 11 vs 9, it doesn’t work that way. The reasons for NOT doing something can be very different to reasons FOR doing something, they are not necessarily like for like considerations. For example, I also prefer a strategy of high gearing combined with high liquidity over a low gearing strategy because that’s what suits me and my attitude to risk. It does not mean that people who prefer a different strategy are either wrong or right, it just proves we are all different, hence we have other preferences such as careers, holidays, cars, films, food and where we live.

For further information and discussion about equity loans please CLICK HERE.


Shared Appreciation Mortgages for Buy to Let Landlords Advice, Buy to Let News, Commercial Finance, Commercial Finance Broker Blog, Financial Advice, Landlord News, Latest Articles, Mortgage News, Property Investment News, Property Investment Strategies, Property News

A radical shared appreciation mortgage product for buy to let landlords is soon to be launched.

The detailed criteria is yet to be released but we do have details of a product launched a few years ago by the same mortgage lender into the residential mortgage market. If we assume that the key features for the buy to let version will be similar, then landlords will be able to borrow 20% of the value of the property with no monthly payments or interest charges whatsoever against the security of a second charge. Up to a further 60% LTV would be able to be borrowed from a different mortgage lender which would take first charge.

In other words, you have to put down 20% deposit in cash on a purchase yourself and if you are refinancing, your total mortgage exposure (including the Shared Appreciation Mortgage), cannot be more than 80% of the value of the property.

Shared Appreciation Mortgages for Buy to Let Landlords

The mortgage lender offering this product (Castle Trust) is well funded via venture capital and is a credible and trusted lender. They only operate via an exclusive panel of mortgage packagers and their network partners.

The way Castle Trust will make their money is by sharing in any capital growth when the property is sold, or in 25 years, or when the borrower reaches age 75, whichever is the sooner.

The product for residential borrowers is based on the lender taking a 40% share in the growth in the value of the property whilst the owner takes 60%. Not bad considering each party is only putting in 20% is it? In fairness though, the property owner does carry the lions share of the risk as the shared appreciation mortgage provider is secured with a second charge.

As an example, based on a property value of £100,000 the figures would work as follows:-

  • Traditional mortgage £60,000
  • Shared Appreciation Mortgage £20,000
  • Owners equity £20,000

Now let’s assume the property is eventually sold for £200,000 – the following is what each party would get back …

  • £60,000 to the traditional mortgage lender (assuming it was an interest only loan and no fees were added)
  • £60,000 to the shared  appreciation mortgage lender (i.e. £20,000 original capital plus 40% of £100,000 growth)
  • £80,000 to the property owner being the balance.

In this example the property owner would quadruple his capital invested and only be paying interest on 75% of his total mortgage liability.

I can see several reasons why this may be attractive to landlords if the BTL product is similar to the version available to residential mortgage borrowers:-

  1. Deals may not stack up on rent to ordinarily qualify for an 80% LTV mortgage but may do so on this basis
  2. Improved cashflow due to only having to service interest on a maximum of 75% of the debt
  3. At 60% LTV many BTL mortgages are significantly more competitive
  4. Landlords will be able to increase their borrowing without affecting their cashflow
  5. Use of other peoples money to increase leverage and returns on capital invested
  6. Castle Trust will rely upon the mortgage valuation of the traditional mortgage lender. Therefore you only have to pay for one valuation.
  7. Castle Trust do not legal or valuation fees and their arrangement fees are only 1% of the advance. This means that total fees could be less than if you arrange a traditional mortgage for a higher Loan to Value.
  8. Castle Trust do not require the consent of a lender providing the first charge. Therefore, the product is technically available to any landlord with borrowings of 80% LTV
  9. Some landlords will wish to borrow 20% LTV via Castle Trust to partially redeem their mortgage with another lender and thus benefit from improved cashflow.

Downsides

  1. The property owner gives away a substantial share of any capital gain
  2. The improved cashflow, in comparison to an higher traditional mortgage, will increase taxable income
  3. Remortgaging may prove difficult
  4. The product is only available on properties located in England and Wales (not Scotland or Northen Ireland)

Questions I can’t answer yet

  • In the example above, has the property owner made a £60,000 capital gain or a £100,000 capital gain?
  • Which buy to let lenders will allow a second charge to be taken over the property for a new purchase?
  • Whether the BTL product will be a mirror of the residential mortgage conditions
  • There are also rumours of 85% overall exposure being offered

We are expecting to receive full details within the next few weeks and funds are expected to be limited. Therefore, if this is of interest we recommend you to get in quickly.

We will be arranging introductions to brokers on our panel of specialist advisers which I have personally hand picked. The role of the adviser will be to review your portfolio and provide you with bespoke advice and quotations based upon your personal circumstances.

The fee for arranging an introduction is £200, payable to Innovative Landlord Solutions LLP (the legal owner of Property118.com) either by credit/debit card or via PayPal. You will then be contacted within 7 days of the product being launched with a view to arranging a priority appointment.

To register please complete the form below.

Professional Adviser Introduction Request Form

  • Price: £ 200.00
    Fees are non-refundable


Buy to Let Mortgage products and market update – essential reading Buy to Let News, Landlord News, Latest Articles

Having just updated the Buy to Let mortgage products on our own in house Buy to Let Mortgage sourcing system and calculator I thought I would give you a summary of what’s Hot or Not in the current market.

Virgin Money have been added to the system because of their helpful attitude and criteria which includes:

  • Day one remortgages – So no need to wait 6 months to remortgage for cash purchases, refurbs, Auction purchases etc
  • First Time Buyers
  • Regulated Buy to Let

However Maximum LTV is 70%. Stand out different product is a 5 year fixed at 4.09% with £750 Cash Back and 2.5% product fee (better for smaller loan sizes where looking to fix costs long term is important.

The Mortgage Works (TMW) always been and old favorite of mine going back to 2003 have a selection of 80% LTV products and no income requirement for existing landlords.

Interestingly they have no longer term products currently above an initial 2 year deal. This will either be because they have purchased no long term funds or are uncertain of market direction at the moment. Example products range from:

  • 2.49% two year fixed with 2.5% arrangement fee at 60% LTV (really only a headline grabber) to
  • 4.14% 2 year fixed 2.5% fee at 80% LTV (one of the lower interest rate high LTV products)

BM Solutions were the old industry go to lender until introducing a maximum exposure of 3 mortgages, but still have one of the most comprehensive range of products up to 75% LTV.  They are also often helpful for flats above or adjacent to commercial premises.

  • 3.19% 2 year tracker £1295 fee 60% LTV
  • 3.89% 2 year tracker 0.5% fee 75% LTV
  • 4.34% 3 year fixed 1% fee 75% LTV
  • 4.99% 5 year fixed 1.25% fee 75% LTV

BM Solutions have NO customer service staff so any mortgages or further advances even must be done by a broker.

Kent Reliance are really mostly famous for being THE 85% LTV lender.

However minimum property value £75,000, proof of £25,000 income required stress tested at 192 times monthly rental income.

  • 4.99% 2 year fixed 2.5% fee 85% LTV reversion rate 6.58%
  • 4.89% 2 year discount 2.5% fee 85% LTV reversion rate 6.58%

Aldermore have a good range of 80% LTV products at 4.98% including 2, 3 and 5 year fixed and a varibale rate for the term. They will do day 1 remortgages for properties bought with a bridging loan on a like for like basis and inherited properties.

They will also consider customer with light adverse credit which very few lenders will allow including:

  • 1 or 2 missed mortgage payments over 12 months
  • CCJs and Defaults registered over 3 years ago
  • Missed unsecured credit payments such as credit cards, mobile phone, loans et

Principality have a penalty free no tie in 2 year discount product at 3.39% with only a 1% + £99 fee at 60% LTV.

Also interestingly they will consider Holiday Homes on their BTL range!

Godiva owned by the Coventry building society are the “Does what it says on the tin lender” I liken them to the Yorkshire tea, or a sliced white loaf of a the buy to let product market. Nothing spectacular just a good solid no frills value for money products.

  • 3.49% variable penalty free for the term of the loan, £999 fee max 65% LTV (very good value with flexibility)
  • 3.79% 2 year fixed, £500 fee max 65% LTV
  • 4.74% Standard variable penalty free no fee max 65% LTV

Cost and product wise the market has been reasonably stable with small improvements adding up each month giving a healthier range of options available especially in niche areas such as:

Terms beyond retirement age, Bridge to Let, Remortgages inside 6 months, Ltd company applications, Higher LTV, Lower fees, Light adverse, Holiday let and more.

All of the above products, lenders and many more can be found by using our Buy to Let calculator and quote engine Please Click Here

If you need any assistance with a Buy to Let mortgage you can also:

Email: info@property118.com or

Telephone: 01603 489 1182013


Does my Buy to Let lending criteria make sense? Buy to Let News, Guest Articles, Guest Columns, Landlord News, Landlords Stories, Latest Articles, Mortgage News, Property Investment News, Property Market News, Property News, UK Property Forum for Buy to Let Landlords

While fully acknowledging that I am not a financial specialist I do know the residential property market. I have a proven track record of making money from letting property for 40 years. In my first book, which I released just a few months ago, I venture to give my opinion of the criteria I would apply if I were lending my money to a person who wanted to buy property to let. Does my Buy to Let lending criteria make sense

  • Does this person know the law and regulation related to the business, has he taken the trouble to become accredited through an education based scheme.
  • Has this person got sufficient funds, borrowed or otherwise, to bring the property up to the Decent Homes Standard, or higher if the market demands, and to meet all the legal requirements before the property is let
  • Has this person done the homework, is there a market for the property he is proposing to let in the area where he is proposing to buy.
  • Is there any regulation in place that the landlord is not aware of, Article 4 Directions, Selective Licensing, planning controls, lease restrictions etc
  • Will the property return a positive cash flow that will pay the loan, keep the property up to standard, pay Agency fees (if the property is going to be managed by an Agent), Pay on-going letting fees/marketing costs and leave a margin for rent arrears and the cost of removing a tenant if necessary
  • Does this person know how to legally remove an undesirable tenant and the length of time this might take and has he got the financial safety net to cover the loss of income during this period
  • Is this person a member of an organisation that will supply the correct documents and support to sustain the tenancy
  • Has this person got a system in place to ensure that he remains legally complaint at all times thus avoiding expensive litigation which may result in large fines, rent repayment orders for up to one years’ rent or up to 4 times the tenants deposit etc.
  • Has the person got Rent Guarantee Insurance, Public Liability Insurance, Landlord Property Insurance and (if the property is furnished) contents insurance
  • Does this person intend to manage the property himself or does he intend to employ a Letting Agent. If he does intend to employ a Letting Agent how will he choose a good Agent, who has Client Money Protection, and is he aware that he cannot devolve his legal responsibilities to that Agent
  • Has this person made provision to re-pay an interest only loan should the property value decrease

Are Banks aware of these important issues or are they making a risk assessment purely on FCA guidance and criteria without taking in to consideration the “real” risks of  investing in property to let?

Do you agree with me or am I missing the point?

Follow me on Twitter@landlordtweets

My book, where I warn about the storm clouds that are gathering for landlords is here >>>http://www.amazon.co.uk/dp/1484855337


Buy to Let mortgage products and criteria – market update Buy to Let News, Latest Articles

After updating and writing the article on our Buy to Let mortgage sourcing system and calculator I thought I would give readers an update of what is still available and popular in the market.

You can find all these products on our system and get a quote (CLICK HERE), but many people ask me what has changed since they last took out a Buy to Let mortgage normally pre-credit crunch.

Loan to Value (LTV):

The industry standard maximum LTV is now 75% as opposed to 85% up to 2008.

You will find the cheapest rate products and and fees around the 60 – 65% LTV region with sub 3% short term rates or products with no arrangement fees and fees assisted such as Valuation and Legal cost.        Eg. 2.49% 2 year fixed with 2.5% fee

80% products will tend to have higher rates around the 5% point, with increased arrangement fees and stress testing to cover the perceived increase in risk compared to lower LTV products. A popular market provider of 80% LTV products is The Mortgage Works with rates starting from 4.14% 2 year fixed with a 2.5% arrangement fee to 5.29% with a £995 fee.

85% is still available with Kent Reliance but at a cost to rates fees and criteria – 4.99% 2 year fixed product fee 2.5% and reversion rate after initial term 6.58% SVR (ouch). Minimum property value £75,000 and £25,000 applicant earned income with proof.

Stress Testing:

How much you can borrow based on the rental income aka Stress Testing has actually changed very little over the years since 2008.  With reduced Loan to Values, lower property prices and increased rental income the amount you can borrow based on rent is not normally an issue unless the property is particularly poor yielding or the Loan to Value is high with a high stress testing.

The average stress testing figure is based around 5% notional rate and covering the interest by 125%. This in plain English equates to being able to borrow 192 times the monthly rental income. However at lower LTVs and interest rates this could be as much as 300 times or as little as 154 times for 80% products.

Criteria:

You can still borrow on Buy to Let mortgages for non standard properties such as HMO’s, new build flats, Multi-Unit, flats above none smelly or noisy commercial, however you have to be prepared depending on lender and the property for a lower LTV, higher interest rate and higher stress testing to cover the lenders perceived risk again.

Borrowing on Buy to Let mortgages in the name of a Limted company is still possible with Lenders such as Keystone, but it is preferred to be a Single purpose Vehicle rather than a Trading Ltd company and the options are vastly reduced. Therefore the tax advantages of purchasing using a Limited company can often be negated by difficulty and cost in finding finance.

Example Products:

Some other products not mentioned that I noted when updating the system as potentially stand out were:

3.99% 2 year Tracker Libor Tracker No Fee and Free Valuation 75% LTV

4.98% 5 year fixed £1,999 fee 80% LTV

3.49% Flexx variable mortgage for the term Fees £999 with no early repayment charge and free remortgage service and Valuation 65% LTV

4.74% Standard variable for the term No fees No early redemption penalty free valuation 65% LTV

2.99% 2 year fixed 2.5% fee 75% LTV

To Search for all the products on our own in house Buy to Let mortgage sourcing system and calculator please CLICK HERE

For any assistance you may need with a Buy to Let mortgage please email info@property118.com

Tel: 01603 489118Buy to Let Mortgage system

 


Our own Buy to Let Mortgage sourcing system and calculator Buy to Let News, Latest Articles

I have just finished updating all the products on our own in house Buy to Let Mortgage sourcing system and calculator. This takes quite a bit of time, but it is definitely worth it and I wanted share with readers what it can do as it is our own in house design specifically based around the needs of property investors.Buy to Let Mortgage sourcing system and calculator

The first Key inputs are:

  • The Value of the property or Purchase Price
  • The amount you want to borrow
  • The Rental income pcm

This will then work out if the rental income is enough for every lender and product on the system to agree a Buy to Let mortgage. This is called Stress Testing and is commonly worked out (but not always) by the rent covering the interest only mortgage payment by 125%.

It will also consider the amount you want to borrow against the value of the property as a percentage. This is called Loan to Value and some products or Lenders will vary from 50% LTV to 65%, 75%, some up to 80% and even one still at 85%

Another factor from these figures are the Lenders’ maximum and minimum loan amounts (most lenders will not lend below £25,000) and also minimum property values ( most lenders will not lend on a property below £40,000 and some higher).

Other key inputs are:

Income – many lenders have a minimum income level for applicants although this does not affect the loan amount as it is based on rent.

Preferred rate type Fixed or Variable – Do you want it to search for products where the interest rate will remain the same for the term of the product or are you happy to take the risk of a rate that may change up or down. The system will then only show results for the type you choose (although you can easily change your mind).

You will then get a list of results (see below) which will show:

  • A list of the available products based on your criteria
  • Interest Rate
  • Product term
  • reversion rates
  • Fees
  • Early redemption penalties
  • How the Stress testing is worked out ie the amount you can borrow for every £1 of rent pcm
  • If you could borrow more how much you can borrow as a maximum and get a quote based on that figure

Buy to Let mortgage search results

Then just click on the Get quote Link for the loan requested or the maximum possible loan.

You will then get an full illustration of the product you selected along with a financial summary showing:

  • The interest only Buy to Let mortgage costs per month
  • A table showing the Capital and Interest Buy to Let mortgage costs per month
  • The minimum amount the rental income would need to be for the loan requested
  • Yield (i.e. annual rental income expressed as a percentage of property value)
  • Rental Return on Equity Invested (net of mortgage costs)
  • The LTV (i.e. the loan expressed as a percentage of valuation) is

And much more see below:

Buy to Let mortgage Illustration

You can find The Buy to Let Mortgage sourcing system and calculator under our Finance tab see below or CLICK HERE to start your search

Buy to Let mortgage tab

 

 


12.5% return on cash invested on a newly refurbished Manchester based development Commercial Finance, Latest Articles, Property For Sale

Last week I was presented with a Manchester based buy-to let investment opportunity which looks particularly attractive. The gross yield is just over 11% but with the benefit of gearing, and having allowed for all costs, the cash on cash returns are coming out at 12.5%. Manchester Buy to Let

I have done some due diligence (you should always do your own though, please don’t rely on mine) and part of that was checking out the availability of finance on these properties.

The only possible drawbacks I can see thus far is that the maximum mortgage is 65% of value plus a lender fee of £995 added to each loan. This is due to the properties being priced at £42,500 and being sold as a new development. The issue with this is that BM Solutions are the only lender offering terms. As BM Solutions are part of the Lloyds Banking Group that can sometimes cause problems due to the group having a rule not to provide more than three mortgages to any one client. The Lloyds Banking Group includes Lloyds Bank, BM Solution, The Mortgage Business, Halifax and C&G.

If you can live with that, and especially if you are married or have a partner, and you and your partner have no mortgages with any of these companies, you could, theoretically at least, buy six of these properties, i.e. 3 each.

The alternative, of course, is to buy the properties for cash and then look to refinance them based on market value after say 6 months.

In the meantime, these are the numbers that came out when I analysed the deal using the Property118 Landlords Calculator:-

Property valued at £50,000 each (15 available, 18 already sold at full price)

Discount offered to Property118 to sell the remaining units 15%

Net price £42,500 each

Monthly rent £400 (based on comparables provided by local agents)

Gross rental yield 11.29%

Mortgage £28,620 based on 65% borrowing plus £995 lender fee added to advance

LTV 67.34%.

Deposit required for each property £13,880.

Interest rate 4.84% (Loan via BM Solutions – IFA to advise best product, this one was selected at random for illustrative purposes)

Mortgage interest £115.34 per month

I have estimated that 35% of rental income will be required to fund the costs of; advertising/letting, management, Gas checks, maintenance, ground rents, service charges and void periods This equates to a monthly averaged cost of £140.

Therefore, cashflow based on the current interest rate is £144.57 per month

Based on these figures the return on equity is 12.5% on cashflow alone. This is net annual cashflow expressed as a percentage of the equity in the property. This calculation is also referred to as; return on cash, cash on cash return, return on capital employed/invested, ROC and ROCI. A 12.5% return on equity is far better than you would get in a bank account and far greater than you can borrow money for too. Over the long term you may also wish to factor capital appreciation into the equation too.

This deal breaks even when interest rates hit 10.9%

If this is of interest and you would like to download details of the development with a view to arranging a viewing and/or making an offer please complete the form below.


Buy to Let Mortgages on Low Value Properties Advice, Buy to Let News, Financial Advice, Guest Articles, Guest Columns, Landlord News, Latest Articles, Mortgage News, Property Investment News, UK Property Forum for Buy to Let Landlords

I have always found one particular lender on our panel hard to consider as they’ve always represented (in my mind) the last resort lender. As 99.99% of my clients are prime, own ‘standard’ properties, have sufficient income and mortgage amounts, this lender has never really been on our radar.

However, the enquiries which I have been getting stuck on just recently have been for properties valued at less than £40k. Only one or two lenders will consider these but the hoops you have to jump through rule out the majority of those enquiries.  And of those that can be agreed, we’re still only talking about valuations of £39k or £38k anyway.

However, I had a call today from this, shall we say more “adventurous”  lender and they told me of their updated proposition.  It’s not cheap, but you have to ask .. compared to what?  I mean, if there is no other choice, then actually they are the cheapest because there is no other option.

They will lend as little as £3k, they have no minimum property value, they told me they have completed on properties of £25k value! Thereforeif any investor has such properties in mind and they don’t want to use all their cash to purchase, they can – via us of course!

The deal allows up to a possible maximum of 60%LTV, which includes the lenders fees, so only a 40% “ish” deposit is required.  And on a £35k property, that’s only £14k outlay.

This particular lender is for when all other lenders say ‘no’.  i.e. this is not a like for like comparison, and mustn’t be treated as such, but this is a deal for when there are no other options available.

For example

  • property purchases or remortgages for properties valued at less than £40,000
  • credit impaired applicants
  • non standard construction including bungalows, high rise, defective, ex-council & semi-commercial properties
  • Micro Mortgages from £10,000 – £30,000
  • Shared Ownership available up to 100%
  • many income sources accepted – employed, self-employed, DWP, pension income, companies trusts and funds

Now, don’t get me wrong, this is not a ‘cheap as chips’ range of products that you might get from a traditional BTL lender, but it is, however, a BTL deal that you can get when no-one else will lend!

For example

  • purchase price of £38,000
  • net mortgage advance £20,750
  • initial monthly mortgage payment £232.31 on a repayment basis (i/o payments only allowed on loans above £25k)
  • interest only on BTL 25 year term mortgage basis
  • interest cover at 120% of pay rate

Who does this work for?

It doesn’t have to be an ‘extreme’ example of all factors as detailed above to qualify.  For example, if you are a traditional BTL landlord who owns, or has seen an opportunity to own, a property of less than £40,000 in value (most won’t go less than £50,000 as we know), then this product allows you to buy / own unlimited properties … without having to use 100% of your own cash to buy them!

And the benefit of that?  You can buy more!

Every deal is on a case by case basis and is manually underwritten.

Useful info;

  • Properties must be let on an AST basis
  • Available in England, Scotland and Wales
  • Minimum age 18, maximum age 80
  • ERP’s during 1st 3 years at 4/3/2%, then 1% thereafter

Summary

When no other lender will say yes, there are deals available throughout England, Scotland and Wales from a long established BTL provider who likes to say yes.

If this is of interest and you would like to have a chat please leave a comment below or see my member profile – linked at the top of this article.

Regards

HowardAdventurous Buy to Let Leting


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Lowest ever BTL interest rates released!“Lowest ever BTL interest rates released!”

It’s a great headline grabber isn’t it?

Well I actually saw this on another property forum and I thought I ought to respond. Continue reading Lowest ever BTL interest rates released!


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