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  • Mortgages & Finance

    Financing HMO/Multi-lets

    I’m new to the site but keen to get some advice on raising finance.

    Post 2010 I was a director of a Ltd company pulling in good money every year and managed to save a nest egg of £250K, £200K of which I ploughed into a 4 bedroom house which I now use as multilet/HMO pulling in £1860 pcm with no mortgage. Earlier this year I then used the other £50K to purchase a 6 bed multilet for £145K and achieve a rent of £2480 pcm.

    I have been dabbled in property for the last 9 years just standard BTL properties and have a 2 bed apartment and also a 4 bedroom family home rents are £1000 and £1200 pcm .
    The problem I have is the last 2 years have purely been involved in purchasing, renovating and managing my multi-lets and my income from my LTD company have fallen to zero so even though my property portfolio is starting to bring in good monthly income, I do not have any books that show this.

    I am keen to purchase more multi-lets as both properties purchased so far and generating great cash flow and have had great capital appreciation on valuation, but I have a major problem I cannot prove my income.

    What is my best option for raising finance to purchase my next multi-let/HMO? Thanks in advance and any advice would be greatly appreciated.
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    Rooms In Cardiff info@RoomsInCardiff.co.uk Guaranteed Rent | Professional House Share | Student Property | LHA & UC |Pay As You Go HMO Managment Cardiff & South Wales

    Rent Smart Wales Agent Licence Number: LR-37010-29907

    The Property Ombudsman: E1405 

    NALS Licence No: A5315

    TMW are an option for you as no income requirements though max LTV on HMOs is 65%. Alternatively you're looking at commercial lenders as the other HMO lenders will want an income/accounts.

    Lisa
    https://www.keys-mortgages.com
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com

    Hi Lisa,

    Thanks for your reply, I already have 2 mortgages with TMW so not keen to take on more exposure with just the one lender. I think I will have to start to explore the commercial route.

    Cheers

    Mark
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    Rooms In Cardiff info@RoomsInCardiff.co.uk Guaranteed Rent | Professional House Share | Student Property | LHA & UC |Pay As You Go HMO Managment Cardiff & South Wales

    Rent Smart Wales Agent Licence Number: LR-37010-29907

    The Property Ombudsman: E1405 

    NALS Licence No: A5315

    Understood but until you have a provable income your options are limited presently and no guarantee the commercial lenders will say yes either as they often like to see some sort of financial back up too.

    KR, Lisa
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com

    From what you have put so far Mark, I think you have a very good chance of obtaining finance from a commercial lender

    As you may already know TMW cap the number of tenants in a multi-let at 4, so bear this in mind for any future deals you do.

    BTL lenders want non-property dependent income, so you would not meet that requirement, apart from TMW as you already know. Have a look at commercial lenders but building up a few more with TMW is not necessarily a bad thing, especially on their Light Refurb product.

    For commercial lenders, are you not classed as a professional landlord? You can prove your income, you have a rental income of £78,480 pa, less expenses; plus you have a track record as a landlord which commercial lenders require. You say, I do not have any books that show this, why not as you are required to declare this income?

    You have the added advantage of being able to throw in your unencumbered property as additional security to a lender, which will increase your credibility and purchasing power with a commercial lender.

    If you buy properties, then refurb them and convert to HMO, you may find commercial lenders less willing to take them from the off as they prefer to lend on properties that are rentable from the start.

    However, you can bridge to begin with then take out the bridge with commercial finance, no silly 6 months rules in the commercial world. I often put these deals together for clients.

    You can forget approaching the main banks for finance, they are not remotely interested in lending for this purpose right now. In fact, they are doing the reverse and calling in loans of this type.

    However, there is a small group of second string lenders that are actively looking for well capitalised, experienced landlords looking to grow their portfolios. You can borrow up to 70% on commercial.

    One question would be, who are the owners of your properties, you personally or your Ltd Co?

    Another question commercial lenders would want to know would be, where will you find the required 30%+ deposits from, other liquid capital or equity from your existing properties?



    Kevin Wright
    07889 526979
    kevinwright@thinkpositive.co.uk
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    Kevin Wright
    07889 526979
    kevinwright@thinkpositively.co.uk
    (24-08-2012 08:29 AM)Kevin Wright Wrote:  From what you have put so far Mark, I think you have a very good chance of obtaining finance from a commercial lender

    As you may already know TMW cap the number of tenants in a multi-let at 4, so bear this in mind for any future deals you do.

    BTL lenders want non-property dependent income, so you would not meet that requirement, apart from TMW as you already know. Have a look at commercial lenders but building up a few more with TMW is not necessarily a bad thing, especially on their Light Refurb product.

    For commercial lenders, are you not classed as a professional landlord? You can prove your income, you have a rental income of £78,480 pa, less expenses; plus you have a track record as a landlord which commercial lenders require. You say, I do not have any books that show this, why not as you are required to declare this income?

    You have the added advantage of being able to throw in your unencumbered property as additional security to a lender, which will increase your credibility and purchasing power with a commercial lender.

    If you buy properties, then refurb them and convert to HMO, you may find commercial lenders less willing to take them from the off as they prefer to lend on properties that are rentable from the start.

    However, you can bridge to begin with then take out the bridge with commercial finance, no silly 6 months rules in the commercial world. I often put these deals together for clients.

    You can forget approaching the main banks for finance, they are not remotely interested in lending for this purpose right now. In fact, they are doing the reverse and calling in loans of this type.

    However, there is a small group of second string lenders that are actively looking for well capitalised, experienced landlords looking to grow their portfolios. You can borrow up to 70% on commercial.

    One question would be, who are the owners of your properties, you personally or your Ltd Co?

    Another question commercial lenders would want to know would be, where will you find the required 30%+ deposits from, other liquid capital or equity from your existing properties?

    Hi Kevin,

    Thanks for your reply regarding proof of rental income the unencumbered property was held in a trust until April this year but is now in my sole name and the other HMO has only been rented for the last 2 months so I haven’t submitted my accounts yet that contain the income from these two properties, but I can show the income they are generating via bank statements. As you say I can demonstrate a proven track record as a Landlord and I am also a Welsh Accredited Landlord, should be looked upon favourably.
    I understand the initial bridging part of the financing but not sure about refinancing via commercial lending. Are commercial forms of lending all variable rate or are there fixed rate options available? Also what are the typical interest rates I should expect to pay on a commercial loan and are the loans interest only or full repayment?
    Regarding deposits part this would be via refinancing plus I have a deposit saved already so I have my eyes open for my next property already.
    Cheers for your response.

    Mark

    (24-08-2012 09:52 AM)Adam Hosker Wrote:  has 20 HMO products available today from 4 Lenders. Three of the Four require No Minimum Income (but proof their is some income) and the Other requires One applicant to have £25k.

    Up to 80% LTV if you have £25k income.
    Up to 75% LTV if wish to proceed on No Minimum Income.



    P.S. One of the lenders is semi-exclusive to us, unlikely to find elsewhere.

    Hi Adam,

    Thanks for the info I will look into this.

    Cheers

    Mark
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    Rooms In Cardiff info@RoomsInCardiff.co.uk Guaranteed Rent | Professional House Share | Student Property | LHA & UC |Pay As You Go HMO Managment Cardiff & South Wales

    Rent Smart Wales Agent Licence Number: LR-37010-29907

    The Property Ombudsman: E1405 

    NALS Licence No: A5315

    Kevin,

    TMW have proper HMO products too and it is those I'm referring to not their standard buy to let products.

    Lisa
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    Lisa All comments are for education and information purposes only and do not construe as advice or a financial promotion. No liability is accepted for comments made. If you wish to receive information in an advisory capacity then please contact me about becoming a client. www.keys-mortgages.com

    Bespoke Finance has 20 HMO products available today from 4 Lenders. Three of the Four require No Minimum Income (but proof their is some income) and the Other requires One applicant to have £25k.

    Up to 80% LTV if you have £25k income.
    Up to 75% LTV if wish to proceed on No Minimum Income.

    You can Call 0800 9202001 and ask for our Commercial guy Mark, their is one of the Three lenders that is Semi-Exclusive.

    P.S. One of the lenders is semi-exclusive to us, unlikely to find elsewhere.
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    Hi Mark

    You are welcome, happy to answer your questions.

    the unencumbered property was held in a trust until April this year but is now in my sole name and the other HMO has only been rented for the last 2 months ....as you say, you can prove the income from bank statements but not from historical accounts, I think it will be down to the commercial underwriters taking a view on this. Although you should be able to show the rent from when the first HMO was held in trust, particularly if you were a beneficiary.

    Are commercial forms of lending all variable rate or are there fixed rate options available? ....commercial lenders usually offer both options but, as you would expect fixed rates are higher.

    what are the typical interest rates I should expect to pay on a commercial loan ....it varies lender to lender but 4.5% to 6% would be a typical range. Commercial lenders tend to price on a case by case basis, rather than a published rate guide, as BTL lenders do

    are the loans interest only or full repayment? ....commercial lenders prefer repayment but often offer an interest only option over a restricted term.

    There would be no need to consider buying using bridging unless renovating and increasing the value was part of the deal


    Regards

    Kevin
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    Kevin Wright
    07889 526979
    kevinwright@thinkpositively.co.uk
    We are currently funding HMO's in Liverpool & Mancester with our property investor clients We work with several HMO Lenders all with varying criteria. We are also Key partners for commerciail lending banks and thus are able to provide both resi & commercial btl/hmo funding options and have access to exclusive hmo /btl mortgages that cannot be obtained on the high street. There is strcit underwriting as you can imagine.

    I also have a Property Resources site for property Investors do contact me below should you seek further infirmation.
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    James A Jenkins
    Commercial Finance & Infrastructure Consultant
    Property Finance GB/Opulento Limited/JRC
    9 Bradenham Place
    Penarth
    Cardiff
    mob: +447812408992 / tel: +442920701666
    skype: finance4u /web: http://www.jamesajenkins.com
    e-mail: james@jamesajenkins.com