IT’S THE WAY YOU CUT IT 

Currently, we are looking to refinance a block of flats for a client.  The property is freehold block and is in Kilburn.   
  
It was purchased in 2013 for £900K.  It contains 6 flats and is held within a Limited Company.   
  
There are two slight complications in placing this deal with a lender.  One is it’s a freehold block of flats; the other is each flat is below the minimum standard requirement.   
  
This whittles down the number of lenders available.   
  
There is no issue with the valuation which is expected to come in at £1.6M, and it has a rental income of £6,800 per month; a yield of circa 5%, which is what you would expect on a property like this.   
  
The client’s preference is to obtain a 5 year fixed rate on the property.   
  
One can see this was a very shrewd investment in 2013.  Indicative of the client, who has been in the industry for several decades.  The property has increased by almost 80% since the time he purchased it, and given the request for a 5 year fixed he’s not planning to sell it any time soon.   
  
The rate we managed to obtain for him is a fixed rate of 3.84%, with a very reasonable arrangement fee of £1,495.  Similar products with similar rates were showing with arrangement fees of 1.5% and 2%.   
  
On the amount he wishes to borrow of £750,000 this equates to £2,400 per month.  This will ensure he continues to have a healthy cash flow of about £4.4K per month, which I’m sure will only increase with time.  Some people have to go to university and get quite a decent job to earn this kind of income, this shrewd investor has it flowing in while he sleeps.   
  
On another case which is a leasehold building, we also have 6 flats.  Here the goal is to pull out as much equity as possible, therefore a different approach has been taken.   
  
Using a simple strategy, which can be applied to this particular building, we have separated the units.  This increases the overall valuation and therefore the loan to value increases, thereby opening up the lender pool.  The lender always looks at a deal from the point of view of how they can get their money back in the event of repossession.   
  
The administration costs in doing this obviously increases.  But overall it is more advantageous to do so, as it will both release more money for the investors and at a cheaper rate.  The saving in chopping into smaller pieces and remortgaging as opposed to remortgaging a lump of six will be about £25K, over two years, not to be sniffed at.  
  
If you require any lending why don’t you get in touch with the office and see what we can do for you.