The Scenario
This client had never used bridging before and was introduced to us because the timescale didn’t allow him to organise a BTL mortgage in time to buy a BMV property. Our quick lending decisions and bridging product appealed as the borrower didn’t need to put as many funds down on day 1, a 9% deposit instead of 25% for a BTL mortgage. The three-bedroomed end of the terraced property is local to the borrower; he lives a 15-minute drive from the security.
The client thought the property only needed a lick of paint which he could do himself with minimal cost. The main intention was to convert the property to an HMO; the borrower currently had 3 HMOs and had a good understanding of the requirements for the licence, he also has a relationship with the local council, so he was confident that he would be able to get the security to an HMO standard quickly, and apply for the licence with no issues. Once the property was converted into an HMO, the borrower predicted the rental income to be approx. £1,600-1,700 a month.
If the property wasn’t converted into an HMO, the rental income would be approx. £1,100-1,200 a month.
Providing the Solution
The exceptional deal was the small amount the borrower had to invest himself! The purchase price was below market value at £210,000, and our loan was £208,000 over six months, so he only needed a deposit of £20,000 to buy the property, and as it only needed a light refurb and HMO conversion, it only cost him another £2,000.
Before any work was carried out, the property was valued at £260,000.
The Result
The property refurbishment has been completed and has been valued at £275,000. The client has secured tenants paying £2,300 per month, providing a 12% yield, and exiting our bridge with a BTL mortgage.
Apex Comments
We had confidence in this borrower as he was experienced and owned 3 HMOs. He was also a property mentor who held seminars in Bristol, so he has vast experience within the property investing industry.