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Case Study

Securing £130,000 Property Finance for a Property Developer

The holiday homes market has always offered the potential for attractive returns - and with the new worries about air travel and quarantine thanks to Covid, the UK holiday home market may be becoming more rewarding than ever. Although returns will be seasonal, running a holiday home business can be far more lucrative than a conventional property where you invest in buying a home you rent out all year round. A good quality property in a sought-after holiday location could bring you in three times the annual income of a standard buy-to-let property.

The difference in returns may be exciting. A 4/5-bedroom holiday cottage in a popular holiday area, with a good level of equipment and its own pool could generate upwards of £3000 a week in high season. A standard property with a similar number of bedrooms for year-round rental market in the same areas could bring in £800 a week, according to listings on Rightmove.

At Rangewell we were recently approached by an experienced holiday homes owner who had seen the potential of a farmhouse in Anglesey as an addition to his existing portfolio.

“I have several cottages dotted across north Wales, and they are constantly booked during the high season. It was easy to see the potential of buying something larger. Large groups of families and friends want somewhere with enough space, and demand is strong. I found an old farmhouse with some land that was already in operation as a holiday home, and felt it was right for my next buy.”.

With his experience - and an existing portfolio of holiday properties, plus evidence of the profitability of his business, he was confident that it would be easy to get the funding he needed.but when he approached his bank, he found that they did not share his enthusiasm. In fact, all the high street banks were unwilling to advance him the funds required.

“It was very frustrating. I had funds available for a deposit and I knew that there would be plenty of demand for the property as soon as I put it on the marketing site. It would be the kind of property that would attract guests all year round - not just in the summer months. Christmas lets of large rural properties can be particularly lucrative. But I just could not get a lender to see things from my point of view.”

What was the problem?

The high cost of property in the UK makes leverage essential for most investors, and a mortgage is a routine investment for most people.

However, holiday-lets present some special challenges if you require a mortgage to acquire one.

 It is against the terms of your mortgage agreement to rent out a property with a residential or even a buy-to-let mortgage to holidaymakers. This may count as mortgage fraud and lenders could call in the loan if they find out.

If you need a mortgage to fund your holiday home investment you’ll need a commercial or specific ‘holiday-let’ mortgage rather than a standard buy-to-let loan. Lenders will also require the letting income to be a certain percentage over and above the annual mortgage interest. Like BTL mortgages, this generally requires a rental income, after agent’s commission, to be at least 125% of the mortgage interest, calculated at an interest rate of 6%.

Some lenders will simply not consider this type of mortgage, as it falls outside their areas of expertise. Those that will may look at the property’s market value when making a lending decision, while others will take income into consideration. 

Lenders will generally require holiday let landlords to own another property and some will require a minimum personal income. Getting a mortgage to buy a holiday home property may be easier if you already own and operate a holiday home, and can show evidence of running a successful business.

Our client seemed to tick all these boxes, but he still found it impossible to get the funding he needed. He was concerned that the property might be sold to another buyer if he could not arrange the funding he needed. 

He approached us for a solution

We saw that there were a number of issues preventing him from getting the funding he needed. The location was very remote, and it seemed that most lenders felt that it would not offer an easy resale if the business was unable to generate enough income from the property. 

There also seemed to be issues with the costs. The asking price  - £600,000 was reasonable for the potential of the business, but high for property in the area.

However, we knew that if a property has an established history of holiday rentals, there are lenders who may base the size of the mortgage on the expected rental yield.

The deal we arranged

We were able to find a lender who could work in this sector of the market and who would look at established yields rather than the pure property values, and  negotiate funding of 70% of the £600,000 purchase cost, at just 4%.

Why we were able to help

At Rangewell, 

We work with all the lenders in the UK market, and not only do we know which are most suitable for a particular type of deal or a particular sector, we know those that can offer the most cost-effective solution for an individual need.

We were able to secure the funding required by our client at just 6%.

£420,000 at 6%



 

No work on the property was required, and our client was able to take the property on as a going concern - complete with some existing bookings. His business - and his revenues - had grown substantially as a result, virtually overnight..

if you are ready to find better answers to your property funding needs contact the Rangewell property hotline on 020 3318 2613

Getting the right deal for your property development plans

 Finding the right lender for your development project can be crucial to its success and profitability. That’s why it is important to speak to the Rangewell team without delay. Our team is made up of industry specialists. Whatever your line of work, we have someone who understands the challenges you face  - and the ways to answer them.

In the case of our holiday home owner client, our skills mean that he was able to secure the property he wanted - and at a rate that supported his own profitability.

We frequently help holiday home businesses arrange the finance they need for additional properties, and can support the basic purchase with other types od funding - such as short term loans if refurbishment is required.

If you have a property funding challenge, remember, that our term includes experts in property finance, and our service is personal. It lets you talk to a property funding expert  who understands the challenges you face with your particular property plans and will work to find a solution that is planned around your business needs.

It often means finding solutions that our clients did not know were possible - it always means having a property expert working to save you money

You may be ready to buy your first holiday home, or you may already be operating the first of what you intend to be a series of properties. You may want to turn a single property into the basis of a holiday homes business. You may simply want to invest in improving the facilities of a property to increase the yield. But like any business you need finance to take things further.

We have a range of funding solutions to help you make the most of your holiday home business plans.We will discuss your plans,  we can then call on our network of  property lenders, which includes virtually every name in the UK market, to get the funds you need. Our knowledge of the approach of the various lenders ensure that we can go directly to those most likely to have a positive response to an application - saving you valuable time, as well as money.

If you have  a property project that needs funding, just call us and one of our experts will be able to discuss the options, and work out the most cost-effective ways to provide the funding you want - whatever the challenge your business plans present.  - and in most cases, our services are absolutely free.



 

To find out more call the Rangewell property funding team for an informal discussion on  020 3318 2613 or email contact@rangewell.com

Property development  costs less with help from Rangewell

  • Individual arrangements tailored to your circumstances

  • Adverse Credit – no problem

  • Repayments geared to your revenue stream - including interest roll up

  • Understanding the funding challenges for your sector

  • Personal service

Talk to Rangewell – the business finance experts

 


 

Our service is:

Impartial

Transparent and independent, treating all lenders equally, finding the best deals.

In-depth

Every type of finance for every type of business from the entire market - over 300 lenders.

Personal

Specialist Finance Experts support you every step of the way.

Free

We make no charge of any kind when we help you find the loan you need.