Case Study – Complex London Portfolio Incorporation
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Having approached several other mainstream mortgage advisory firms, the client had been unable to find a solution to incorporate their London property portfolio to an SPV (special purpose vehicle). After finding The Buy to Let Broker from a quick online Google search, they got in touch to see if we could help them finally find the right proposition and get the funding that was needed to ensure the long term viability of their property business.
Consisting of ten properties and worth in the region of £4 million, the client’s portfolio was made up of a blend of property types including several ex-local authority flats in the capital. Adding to the complexity, some of these properties featured deck or balcony access, plus several were tenanted to the local council on a sub-let basis as social housing. So, there were a multitude of factors to consider when it came to financing the purchases in a limited company structure.
Rachel Fairclough was the right broker for the challenge here, possessing a huge amount of experience in incorporating portfolios having navigated the potential pitfalls successfully many times since 2015.
Using all of her criteria knowledge and industry insights, Rachel was able to ask the right questions during the initial conversation to understand the client’s situation and plans for the portfolio long term. This enabled her to identify a suitable lender which would ultimately deliver the right financial solution, following the right early diligence checks.
Having taken the time to discuss the key features of the properties and calculate the full equity within the portfolio, Rachel suggested the client restructure the borrowing here to reduce the number of properties financed in the incorporation thereby reducing the overall costs, at the same time keeping the loan to value or ‘LTV’ on each property low enough to ensure the best products would still be applicable.
In other words, why finance 10 properties when you can deliver more competitive rates for the required loan amount by only financing 6, thus leaving 4 properties unencumbered and free of valuation, ILA (independent legal advice) and legal fees, not to mention broker fees.
This simple straight-forward solution would not only deliver the funding that they were looking for, but would allow the client to easily finance and raise funds against the unencumbered property should it be needed in future.
Of course since the portfolio was being incorporated, all property would move to the SPV, including those without borrowings.
A huge part of what we do here is termed ‘upfront due diligence’, this ensures that what we quote clients will ultimately be fit for purpose and saves us losing clients money and moving the goalposts during the process. In this multi-property case, the suitability of the properties (because they were ex-council with deck access) was paramount alongside the council tenancy agreements, taking care to look at the terms and any break clauses in place. In this specific instance, the property specifics alongside the tenancy agreements were referred to the lender first, to save the clients paying any fees until we knew that these potential hurdles had been extinguished. Once the lender agreement was received we could proceed from a position of confidence to quote and application. We work in a similar fashion with all cases, understanding the hurdles at the outset and jumping over them as early as possible in the quoting process is paramount to smooth success.
Rachel was quick to act and even personally contacted several lenders to ensure that they would accept the client’s particular circumstances. She was able to provide the client with a full quote in less than 24 hours, with several lenders that would unquestionably accept this specific situation in full.
Having clearly laid out all of the options for the client, including a full breakdown of all the costs and savings available, the client was able to incorporate the full portfolio with specialist lender Fleet Mortgages, at rates better than the client had originally expected.
We were hugely impressed with Rachel’s speed, clarity of communication and attention to detail and the client is now enjoying all of the financial benefits of the new incorporated structure.
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