Client Requirements

Purchase a tired 1 bed flat in auction. Plans are to convert it to a 2 bed flat and then refinance and withdraw as much of the added equity as possible, whilst retaining the property as an ongoing investment.

Challenges

The condition of the property made it not suitable for standard mortgage lending. Also this was a 28 day completion.

Solution

The initial intention was to acquire the property only.

It was recommended to use a bridging lender that would lend 75% net of purchase price to secure the property. The lender in question wouldn't care about the condition of the property and as it was a bridging loan they are more than capable of being able to complete quickly.

There was a 5 month schedule of works for the conversion and 2 weeks prior to completion a remortgage application was submitted. The client had spent £67k and local agents had given them a value estimate of £550k and a rental valuation of £2400. We then approached a buy to let lender who would allow the added value to be taken into account and remortgaged at 75% loan to value on a 5 year fixed rate. In 8 months the client now has a £550k flat with only £31,500 (plus fees) of their own money left in the deal. They also receive £750 in net rental each month.