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Case study: Creating two single residential homes for rent from interlocked properties

by | Dec 1, 2021 | Clients, Case Study

The investor bought two adjoining semi-detached properties in Lincolnshire – a two-bedroom house and a three-bedroom house. Although the properties were on separate titles, the previous owners had knocked through and interlocked the properties. This made it challenging to sell, but CPC Finance’s clients saw an opportunity to create two good rental properties without needing planning permission.

The investors bought both properties in November 2018, for £180,000, aided by a single 75% LTV 18-month short term loan of £135,000 over both properties, with a monthly interest rate of 0.75%. The investors were able to service the loan with monthly payments, rather than opting for retained or rolled payments.

The properties had been considerably neglected, both internally and externally. The whole of the interior needed to be reconfigured. The investors started with the two-bedroom house, to be able to finish it and rent it out. It cost £14,500 to complete the interior works on this first property. As part of this, the investors separated the two properties so that they were once again different houses.

Once those works were finished, the house was valued at £155,000, with a monthly market rent of £750. With CPC Finance’s support, the investors were able to obtain term finance in the form of a single residential buy-to-let mortgage worth £116.250 for the two-bedroom house. This enabled them to pay off the majority (75%) of the initial short term loan (which had no early redemption fee), leaving them with a small short term loan on the other property.

They then proceeded onto works on the three-bedroom property, which cost £26,000. Upon completion of works, this property was valued at £210,000, with a monthly rent of £1,000. To rent it out investors were able to move the property onto a single residential buy-to-let mortgage of £157,500.

Overall, this strategy enabled them to pay off the initial short term loan, regain the deposit money and the money spent on works and make approximately £50,000. Now the investors have retained both properties as part of their portfolio for rent and with the £50,000 from the uplift, move on to the next project.