heavy refurb for commercial auction purchase, LA9
Client circumstances:
Our clients were a property development company who were the winning bidders on a former department store valued at Ā£750,000. They initially needed Ā£375,000 to complete the investment purchase with a portion going towards substantial works which included a modernization of the property and the building of eight new residential apartments.
As the property had been purchased via auction, the clients needed to secure a short-term fix extremely quickly to ensure they didnā€™t lose their 10% deposit, or the property. This is when their broker contacted us.
MT Finance solution:
After working closely with the valuer and the solicitors, we released a bridging loan of Ā£375,000 at 50% LTV of the propertyā€™s value of Ā£750,000. Interest was retained at 0.75% over a 12-month term.
The clients can request up to four further drawdowns as the works progress, which ā€“ combined with the first tranche ā€“ can total up to Ā£875,000. Each request for further funds will be based on the propertyā€™s value at that specific time and is subject to the LTV on total borrowing not exceeding 50% and a 50% cap of the GDV. As the works continue, the market value will increase, allowing for further borrowing.
The benefits:
Our bridging loan ensured that the clients were able to purchase the investment property without losing their deposit. The works they have undertaken will increase the propertyā€™s value as well as making it more attractive to high street lenders. This will enable the clients to refinance out of our bridging loan with a traditional buy-to-let mortgage based on the propertyā€™s higher value. They wonā€™t face any exit fees or ERCs if this happens before the end of our 12-month term.
Once the works are complete, which will happen during our loan term, the clients will have a new multi-unit property in their portfolio which they expect to generate an estimated Ā£162,000 in rental income per year.
