Commercial Property Portfolio Mortgages for Landlords

A Multi-Unit Freehold Block (MUFB), or "multi-unit property", is defined by the fact that unlike Houses in Multiple Occupation (HMOs), which are usually like student house-share arrangements where at least three tenants may share kitchen and bathroom facilities, the separate units are self-contained but all owned on a single freehold title. Each unit has its own kitchen and bathroom facilities, though the tenants may share hallways, a garden and facilities like the porch, as there will be a common entry.  

A MUFB might therefore be:

• A building converted into residential use with self-contained flats
• A building originally designed as separate self-contained flats, owned by one landlord on a single title
• A large house later subdivided into flats, studios or bedsits
• A modern purpose-built apartment block

What multi-tenant properties promise is greater profitability compared with single-household lets, or a couple of tenants jointly leasing a property. Not only can more revenue be brought in from multiple tenants, having more tenants in a property provides a buffer against rental voids. Many landlords expect to see returns at least one-third higher with multiple tenants.

A substantial terrace or freestanding house may lend itself to subdivision into separate flats, which could mean cheaper subdivision costs and the property retaining its value - and there is the added benefit that tenants may be more responsible with a MUFB. You will, of course, need planning permission to subdivide an existing property into flats, but you won’t need an HMO licence to operate the tenancies.

The finance you need

Renting out separate units rather than an HMO attracts more mainstream property lenders offering more flexible terms, better rates and more favourable set-up costs than HMO mortgages. Fees and rates for multi-unit mortgages tend to be slightly better than for HMO mortgages too, reflecting the greater security for the lender: if necessary the units can be sold separately to recoup the lending.

Finance for properties with up to 4 separate units is generally quite straightforward and an LTV of up to 75% is possible, while for larger properties with more than 10 units there are only a very few lenders who are willing to offer finance. The issue is the need to find multiple buyers in the case of a foreclosure. This can mean lower LTVs - closer to 60%.

Commercial mortgages

The most common solution is a Commercial Mortgage. These are one of the most common forms of finance used to buy commercial or residential property. 

Commercial mortgages operate much like residential mortgages and are secured on the property itself. Generally, commercial mortgages allow you to spread the cost of your property over 15 years or more.

However, there are some significant differences compared with residential mortgages, including the fact that the rates and terms for a commercial mortgage are arranged individually. There will also  be valuation, arrangement and legal fees and additional costs for the services of professional advisors which will add substantially to the initial costs

Lenders will look closely at your property and the potential revenue it offers.

Commercial Mortgage deals can be either fixed-rate or variable rate, and you may also be able to choose between a repayment mortgage option where you pay the capital and interest back each month or an interest-only mortgage, where you only pay the interest. If you choose this option, the lender may seek evidence of an appropriate investment policy that will cover the outstanding capital at the end of the loan term.

Commercial mortgages are arranged on an individual basis, and only some suppliers will consider funding HMO investment properties - so getting expert support to find the right deal is essential.

Refinancing an existing investment

If you already have property investments, property remortgaging or refinancing could help you reduce your costs by letting you pay off an existing loan, replacing it with a new one at a lower cost. Your property is likely to have appreciated in value and the chances are that you can get a better deal by refinancing.

Property investment solutions from Rangewell

All types of property investment and development will involve high costs but the key to getting those costs under control is to call on a funding expert.

At Rangewell, we understand that even a fraction of a percentage point can make a substantial difference to what you actually pay, while fees and penalties can complicate the position still further - which is why we work harder to get the deal you need.

We work with lenders across the market and we know the many different lenders who may be prepared to offer property funding. Each has their own approach to interest rates and fee arrangements.

We look at them all which means that you are more likely to get the financial solutions you need. Our knowledge can not only help you secure the funding you need - it can save you a great deal of cash.

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.