Case Study

Securing £150,000 Buy-to-Let Mortgage for Commecial Investors

£150,000 BTL finance  

Buy to Let investors have faced challenges in recent years with the loss of tax concessions. However, serious investors have found ways to minimise the impact of these measures, and to continue to use BTL as the basis for a profitable business.

Of course, some basic principles have remained unchanged - and the ability to secure funding for BTL investment at the lowest possible rate is still key to profitability.

But low rates alone may not be enough. The ability to call on cash quickly may be vital to secure a purchase at a lower price than would otherwise be possible.

At Rangewell we recently found a way to cut the cost of finance for an experienced Buy to Let investor.

Our client was an experienced property investor, who had a number of flats and small houses in and around Manchester. He had built up his residential portfolio with a combination of savings and Buy to Let mortgages, and despite the recent changes in the taxable position of BTL investments was receiving a steady income from it.

He was already operating his property with a limited company to take advantage of what he saw as a better tax position.

He was on the lookout for additional property, and monitored the property auctions serving his area. When he saw two houses listed in poor condition close to one of his existing properties he made immediate arrangements to view. 

Property may not be in a lettable condition or be otherwise unmortgageable is often sold at auction, and auction buying can be popular with investors, who may be prepared to take on property in need of substantial work.

 He believed saw that some repairs and refurbishments would first be required, but that there was potential for profit - if he could secure the necessary funding. Traditional lenders - high-street banks and buy-to-let lenders - will not lend when the property is not in an immediately habitable and lettable condition. This limits the number of buyers and provides an opportunity for property professionals to secure a bargain.

“I was happy to buy at auction. It can be a risk, but I had taken a good look at the properties, and worked out the work required. I saw that with my contacts in the trade, I could have it in a mortgageable condition inside a month.”

However, buying at auction requires cash funding. The precise arrangements vary with different auction houses but with most auction sales, when the gavel falls the buyer will be expected to pay 10% of the hammer price immediately.

They will then be required to pay over the balance which will include the auctioneer's commission, within 28 days.

Failure to provide the full funds may lead to losing both the property and the deposit. The solution used by most property professionals is Auction Finance - which is a short term loan secured on the property designed to be arranged quickly. However, the costs can be high, and this means that auction finance should be replaced with a more affordable solution such as a commercial mortgage as quickly as possible. 

“I knew the houses down that road, and I had a clear idea of what would be required to get it mortgageable. I could arrange Auction Finance for the short term.”

Do you need auction finance for your next property deal? 

Our client arranged the funding he needed, and was able to secure both properties, and bring in a team to take care of the work.

With the properties made habitable, he set about replacing the £150,000 auction finance he had arranged. But the best offer he could find from his usual lender was 8.4% over base rate.

“The costs were working out much higher than I had anticipated - but until I found an answer, I was locked into my auction finance - and that was costing me 1.5% per month.”

It looked as though his investment was going to return a much lower profit than he had expected and he turned to Rangewell for a solution. 

Finding a solution

We have a specialist property team, who work closely with lenders across the market. saw that the offer our client had received was unusually high, and looked into the reasons why.

They saw that the problem was based on the high level of borrowing on the rest of his portfolio. His existing lender had introduced new lending criteria, which saw their exposure to our clients business as exceeding their guidelines.

We set about finding a lender with a more flexible approach, and found a leading property lending specialist which could offer the £150,000 at 2.9% over base rate. 

 Initial offer  £150,000 at 8.4% over base rate = £1,169 per month

 Rangewell offer  £150,000 at 2.9% over base rate = £456 per month

Total saving £713 per month

Do you need large scale property finance to make the most of your buy to let plans?  Simply call the property team at Rangewell on 020 3637 4150 - or email contact@Rangewell.com. Our service is free.

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