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  • Mortgages & Finance

    Valuations on properties purchased BMV

    Hey all,

    Today we viewed a beautiful period property that would make a great investment opportunity and should have no problem letting at a good price each month.

    I think the figures could work but unfortunately our mortgage broker is on holiday and I have no one else to ask. If the price was listed as £450,000 and you offered £400,000 and it was accepted, what would a valuer do? Would they look locally and possibly estimate it at £450,000 even though you are only paying £400,000 and therefore the mortgage company would offer you a BTL mortgage on £450,000 or would they only offer you the 75% of the purchase price?

    If they would only offer you 75% of purchase price, would it possibly be a better idea to buy on bridging, refresh the property, make some small improvements and then move over to BTL mortgage?

    If we can somehow get a mortgage on the higher amount the figures look great, if we only get a mortgage on the purchase price it wouldn't be that good a return on a monthly basis.

    They've had 3 sales fall through and could be under pressure to sell so I think a low offer stands at least a small chance.

    Thanks,
    Rich

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    The valuer would value it at the purchase price or the market value, whichever is the lower.

    Therefore, they would value it at £400K.

    Your LTV would depend on what borrowing the rent will support.  Due to the PRA, you can no longer assume that you can achieve 75% LTV!

    The best way to finance this type of project is to buy it on bridging finance, add value to force the appreciation, and then take out a BTL mortgage to redeem the bridging loan and pull back as much of your cash as possible,

    However, there is no guarantee that you will the up-valuation you want on completion, so do not assume that you will.  Keep a photo-journal of the project and copies of all the bills and invoices to show the valuer when you get the re-valuation done to take out a BTL mortgage.

    There are several lenders, like Shawbrook, who offer bridging finance combined with term finance, and these are worth considering, as you know that you have an exit from the bridging loan. The PT Brokers team on 0333 363 6507 will be able to advise you of the finance options available.

    Bear in mind that period properties can cost more to refurbish as you will want to retain the period features.

    ​Hope that helps?

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    Hi Vanessa,

    Thanks as always!

    I don't believe PRA would impact us yet, if you are referring to the 4+ properties, we've got 1 due to complete next week, 2 off plan that aren't finished til 2020 and another that's in progress. I estimate the rent on the property to be £2,000 - £2,200 pcm so it would be plenty of income.

    In that case you are right, adding value whilst bridging is probably the best way. The property is fundamentally sound, it's in good general condition and all original features have been kept/maintained. It just needs some refreshing, lick of paint, new flooring perhaps in a few places. 

    There are a couple of aspects to the property that I don't like and would want to change, for example merging a single toilet with the rest of the bathroom next door, possibly adding a wall to create a study space in what is currently fairly useless space. I'm not sure if any of this and a refresh would be considered "adding value" though.

    What are the big tick boxes that would make a valuer think, "yeah this is now worth more"? There is a large eaves that could possibly be extended to add another room/bathroom but that would be expensive and would it even add much value to an already substantial 4 bedroom + study property?

    Thanks,

    Rich

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    New kitchens and bathrooms add value, as do adding en-suites, but extensions and loft conversions adding another bedroom would probably add the most.

    See - Best ways to add value to a property ... ?

    It would be worth exploring how you could optimise Permitted Development Rights.

    The PRA was in two parts, and I was referring to the other part - the rental coverage calculation.  I estimate that the rent of £2K per month would support a borrowing of circa £301K, meaning that you could potentially achieve a 75% LTV.

    The other option would be to see if it could be split into two or three flats, but that is beyond my level of personal experience, so hopefully others with more experience will be able to comment in that regards.

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    Thanks, I suppose the rental income has been so high on properties we have been looking at (HMOs) this hadn't come in to play. I guess PRA is just about being up front with my broker and ensuring he knows all of the facts.

    I've thought about the flats, I think it could be doable which is another reason why I like the property, it has so many options. It could be an HMO, it could be a beautiful single let and it has 3 spacious floors that mean it could be 3 flats.

    I think an en-suite and loft conversion are possible but expensive. I'd need that to add a good chunk of change but as others have mentioned you can learn up front exactly what a valuer would raise the price to with certain products.

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    Hello Rich,

    Precise offer a Refurb to Let process. Basically, it's a bridge loan to purchase,  then you can make the improvements and then exit onto a BTL mortgage at the new market value.

    I think the same valuer gets appointed for both the bridge and the BTL, hence they can see the improvements and the value add you've done to the property. .

    Regards,

    John

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    You can contact me via Direct Message, or 07788 219647 or call the team on 01206 654444 for personalised quote and advice


    Hi John,

    Thanks, we've been looking to use this product but it will be our first time so I'm trying to get an idea of how it would work for a project like this.

    We were generally tending to view properties that needed a full renovation but this one clearly showed the sellers to be in a rush and it is sizeable and in a good location so it was a "wildcard" property we decided to view.

    Learning that 3 sales had fallen through and that the couple had borrowed to not lose their next home just had me licking my lips on such a beautiful property Smile

    Thanks

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    Have dropped you a Direct Message.

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    You can contact me via Direct Message, or 07788 219647 or call the team on 01206 654444 for personalised quote and advice

    There is at least one bridge provider which works on value not lower of price and value. Bridges cost you a lot more money so it really should be explored as a last resort. What about releasing equity elsewhere? You need 6 months before you can refinance but you may be able to agree to do some of the works between exchange and completion if necessary.

    Call me at Johnsons Mortgages if you wish to discuss. Stuart@johnsonsca.com or 0203 907 7022.

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    Tax advisor and mortgage broker

    stuart@johnsonsca.com

    02039077022

    At the moment we are finding valuers particularly harsh on re-valuations, especially when its a lender that uses panel valuers.

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    Phil Stewardson.

    Stewardson Properties.

    Stewardson Developments Ltd.

    Burson Land Ltd. & Jennings & Gilchreaste Ltd.

    http://www.stewardson.co.uk

    Follow me on twitter - @philstewardson


    It’s a true fact if your borrowing money for purchase or a remortgage

    the man with the clipboard or IPad will make or brake the deal

    it’s alk a gamble

    you must remember the valuer gains nothing from over valuing

    you may see an opportunity which he may not support

    the smallest think can sink what you have planned and there will be very little you can do about it

    you pay the fee £400 and more and he may report what you don’t wish to hear

    it’s great if you get what you want but it’s a bummer if you don’t get what you want

    for a deal to work today you need lowest leverage possible

    and don’t forget some mortgage brokers charge up front fees and even they have little power of a down valuation

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.