Bringing properties in the North and South under one mortgage to finance a purchase
Loan type: commercial investment mortgage
An investor wanted to buy 12 properties in Burnley, Lancashire. In their existing portfolio, they owned two single buy-to-let London properties with a total value of £910,000 (£460,000 + £450,000). The existing rent on the two properties totalled £33,300 yearly (£1,400 per month + £1,375 per month respectively). This equates to a relatively low rental yield of 3.6%. Both properties were already mortgaged, with a total mortgage value of £512,300 (£263,500 + £248,800). The investor had about £400,000 equity within the two properties. The 12 prospective Burnley properties were worth £580,000 as a portfolio and produced a total rental income of £54,300 yearly, equivalent to a rental yield of 9.3% – a much higher yield than the London properties.
To fund the purchase, CPC Finance helped the investor obtain a single mortgage across all 14 properties: the two London properties, and the 12 Burnley properties. We were able to combine the equity built up within the two properties in the South with the rental income from the Northern properties, resulting in a mix in the portfolio and the best of both worlds.
Combining the 14 properties, we had a total asset value of £1,490,000 and a total asset rent of £87,660 (equating to an overall yield of 5.8%). This enabled us to secure a single commercial investment mortgage worth £1,096,875. The mortgage had a 4.25% interest rate and an arrangement fee of 1.25%. This kind of mortgage is typically available with an interest-only facility for up to a 20-year term, with three, five, or 10 year fixed rate. This new mortgage repaid the existing mortgage on the two London properties and paid for the purchase of the Burnley properties with no cash deposit required.
See our blog for the full case study.
Pub and hotel to pub and apartments
Loan type: Short term loan, refurbishment loan and residential investment mortgage
CPC Finance clients wanted to convert a hotel above a ground-floor pub into 1-2-bedroom apartments in Bourne, Lincolnshire.
The clients purchased the freehold for the pub and upstairs hotel together for £250,000 without planning consent. CPC Finance helped the client obtain the bridging loan for the purchase and the buyers put down a 40% deposit.
They obtained planning consent to convert the hotel into 15 1-2-bedroom apartments. One of the requirements of the planning permission was that they had to leave the pub below as a commercial business. It took 12 weeks from the purchase date of the property to obtain permission to do the conversion works. Before putting in the application formally, the client had investigated the options with the local council and put in a pre-application.
Once the planning permission was secured, CPC Finance helped the client obtain a further refurbishment loan to convert the hotel into flats. It cost £750,000 to convert the hotel into the apartments, leading to a valuation on completion of works of £1,455,000.
After works, CPC Finance helped the client secure a 75% LTV residential investment term mortgage for the apartments, excluding the pub. The flats are let out from a single freehold title. The annual rent from the flats is £126,000, which does not include the pub rent. The business value of the pub was not counted in the final valuation as the future of pubs is particularly uncertain at the moment.
Creating a five-bedroom HMO from a two-bedroom single residency
Loan type: Short term loan to buy-to-let mortgage
Investors Sanjay Kumar and Malkit Purewal purchased a five-bedroom property located near West Drayton, West of London, which they wanted to convert into a House of Multiple Occupancy (HMO). On purchase the property was in very poor condition and the investors needed to do considerable refurbishment work to bring it up to the standards they set.
They purchased the property for £280,000 on 8th March 2019 and converted it from a two-bed, mid-terraced house into a five-bed licensed HMO at a cost of approximately £100,000; they had borrowed 85% of the purchase price to do the works. On completion of the works schedule it was re-valued at £500,000. They were then able to remortgage the property with the same lender, switching from the initial short-term (bridging) loan to a term facility with a loan to value of 75% i.e. a loan of £375,000, without incurring any early repayment charges or new lender arrangement fees. The whole deal, progressing from purchase to refinance after works, was completed in just five months.
Now the property is fully let to five individuals in rooms that are all en-suite, and equipped with small kitchenettes, but with no cooking facilities, which takes place in the separate communal kitchen area. Demand for these rooms is solid and the investors typically receive £650 per room per month and in total the gross rental income on this property is approximately £39,000 per year.
If you would like to find out more about this project and how Sanjay approaches HMO investments, read his interview with Richard Bowser from Property Investor News.
Residential conversion – three bedfroom house to five-bedroom HMO
Loan type: Heavy refurbishment short term loan and buy-to-let mortgage
An investor purchased a three-bedroom house with a non-conforming construction and adjoining land. The investor paid £340,000 to buy the property and land together, intending to convert it into a five-bedroom House of Multiple Occupancy (HMO). CPC Finance helped the investor obtain a heavy refurbishment short term loan of £255,000 to purchase the property and split title on completion.
A valuation was carried out, which provided a GDV figure which could be relied upon for a 6-month period and excluded the adjoining land.
The investor spent £80,000 to convert the property. The works included a rear extension and en-suite bathrooms for each of the new five bedrooms.
A re-inspection for the valuer to confirm all works were completed and as this was within 6 months, the lender could rely on the figure confirmed in the original report.
Upon completion of the term facility, the investor owned a five-bedroom HMO property worth £460,000, generating an income of £35,000 per annum and a separate parcel of land mortgage-free, giving the investor the option to build on the land in the future.
Car showroom to cafe and apartments
Loan type: Short term loan and second charge loan
Malkit Purewal was looking to purchase a former car showroom, which he planned to convert into four residential apartments, with commercial space underneath. Malkit initially needed finance to buy the property and worked with CPC Finance to secure a short term loan.
CPC Finance arranged, via Shawbrook Bank, a loan advance for 100% of the purchase together with an additional £100,000 to complete the works. This was done by using the client’s residential house as additional security and a comfort charge was registered behind his first mortgage.
Malkit explains, “We specialise in the more complex side of property investment, particularly in houses of multiple occupancy. We have been working with the CPC Finance team for two years and they are now our preferred commercial broker. The finance we need is often time-sensitive and CPC Finance really understands the best products out there for us. The team always deliver when they say they will and this has meant that recently we have been able to do about one deal per month with them.”
Now that the conversion is complete, Malkit is working with CPC Finance to move from the short term loan to a buy-to-let mortgage. The uplift in the property’s value will mean the refinance will repay the short term loan and remove the charge on his residential house.
Four-week property turnaround from purchase to rental
Loan type: Short term loan converted to BTL mortgage
This property was in Boothtown, a suburb of Halifax. This is an area with a strong rental demand due to proximity to good primary and secondary schools. The deal was conducted off-market and the investors first made their offer on the property over a year prior to purchase. The investors agreed to fit in with the owner’s timeline regarding the sale. A completion date was agreed and postponed twice in the eight months leading up to completion and eventually a firm date was settled on for the end of June 2019.
The purchase was financed through a short-term bridging loan from Shawbrook Bank, to be converted to a BTL mortgage once the work was completed and the property tenanted.
The investors carried out light refurbishment work, including installing a Damp Proof Course (DPC) on the ground floor, a new boiler and insulation in the loft bedroom area and a complete redecoration top to bottom with new carpets. From time of purchase, the investors were able to carry out the works and get a tenant in place within four weeks.
For more details about this case study including cost and ROI calculations, see our blog.
Refurbishment of a derelict building
Loan type: Short term loan
Mark Forrest of Leaf Forrest Ltd found a run-down property in Broadstairs Kent, ideal for renovation. Speed was of the essence in arranging the finance as the property was being purchased via a sealed bid process and Mark was aware that, if successful, completion would need to take place quickly. The CPC Finance team was approached by Mark and was able to arrange the short term finance within the timescales required.
Mark explains, “We have worked with CPC Finance for a few years now and regularly use the team to source finance for purchasing property through auctions in various locations. You have to be quick off the mark with auction purchases and we knew that CPC Finance would deliver the goods allowing completion to take place within the timescales imposed.”
Mark was able to start refurbishment work on the property and has increased the value of the house significantly – he will now be speaking with CPC Finance in order to arrange a term facility to repay the short term loan.
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