11:39 AM, 19th December 2016, About 6 years ago 14
I’m in a bit of financing conundrum and was hoping your good selves might be able to provide some potential strategies for financing.
So the situation is, I purchased an un-modernised 2 bed split level (80sqm) flat in a council estate at auction for a bargain price in May 2016 into a LTD CO SPV. The property was located in Brixton, London (zone 2), across the road from the ever trendy market and 1 minute walk from the tube station. I attempted to obtain a mortgage within the 20 day auction completion timescale but was unsuccessful, citing that the property needed to be refurbished. So I purchased the property in cash and spent the best part of 4 months full refurbishing the property to a high specification, new kitchen, bathroom, floor, repainting throughout and the property. It’s now a gorgeous space and have secured tenants on a 12month AST for 1900 gbp PCM.
Here are the numbers:
Purchase price 275k
costs – stamp duty, auction fees, legals etc, 25k
refurbishment cost 40k
Total cost 340k
So after the refurb I went back to my broker, who forwarded it onto the original lender and responded that they would be “very interested” to look at the property again and instructed another valuation. The letting agent advised that the surveyor advised that he was “impressed” with the flat and on the report recommended it as suitable security and valuing it at 430k. So have 90k in equity and feeling good about myself after all the hard work refurbishing the flat, thinking the mortgage is a foregone conclusions. BUT the mortgage company turned around the knocked back the application, citing that it was in a council estate!
Never mind that it was a large 2 bedroom apartment, in the fastest gentrifying area in London, across the road from a lovely market and 1 minute walk from a tube station and above all let for 1900pcm. They don’t want to lend on it because it’s in council estate. I was completely shocked by this decision, that they’d be unwilling to lend on a gorgeous flat in such a desirable location, purely because it’s in an estate.
My broker advised that because I purchased it in an SPV, it’s cut down the amount of lenders I can apply for and they proceeded to forward it onto every conceivable lender in the space but all have come back and said no.
I would really like to keep this property in my portfolio due to the yield % and feel that it will continue to increase in value due to it’s excellent location.
So my question is, are there any strategies I can employ to finance this purchase at 60-70& LTV, (save bridging finance, which makes no finance sense to the exorbitant interest rates), or do I have no option but to sell it due to the amount of capital locked up in the property?
Many thanks for your responses in advance