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portfolio refinance | Baya financial

portfolio refinance

How do you value mixed use properties?

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Commercial Element is nearly always a vacant value. Unless you have a blue chip company on a long lease when we can sometimes achieve a market value.

Residential Element will be valued using similar comparable properties in the area. Remember properties above commercial are usually less desirable.

If you have an HMO as part of the residential part, you may be able to achieve an uplift on the bricks and mortar with a yield-based or hybrid valuation. This is where you can benefit!

You will either end up with an aggregate value (the sum of the individual parts) or a block value for the building, where around 10% is deducted from the aggregate value.

Which figure the lender uses will be up to the valuer and their comments. Can the property be broken up and sold individually? And would there be sufficient demand to do this in 12 months?

 

Bridging vs Standard Mortgage

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How does bridging differ from a standard mortgage?

I am often asked what the benefits of bridging are, and you all know I’m a big fan!

But…..

How does bridging differ from a standard mortgage?

and how does that help with your next deal??

Lenders do not assess the mortgage on affordability

This means that it doesn’t matter what the rent would be for the property in its current condition, they won’t restrict how much you can borrow based on that figure.

For example…

If the property is in poor condition, the valuer will give a lower figure of say £600 pcm. When it is refurbished you may be able to rent it for £800, but the £600 may not be enough to borrow the full amount.

The Legal Process is much quicker.

The lender’s requirements for searches and documents from your solicitor are so much smaller than a standard purchase so we can often complete quicker than even a cash purchase, where you would usually want full searches.

The property can be in any condition, as long as you have a plan that works!

You don’t need a kitchen or bathroom, there can be structural issues, and dampness… the list is endless!

As long as you have a plan for the works, the funds to do them (and some experience if they are extensive) then we can do it.

This will open up the properties available to you, you aren’t competing with everyone else.

The property is appraised on your schedule of works and costings

We provide the valuer with your schedule and costs of work, so you will get the current figures, as well as post works figures.

You will have a guide for the GDV and rental potential once it is completed. This will give you some certainty over your project and whether it is viable.

If you are happy with the figures we can usually use the same valuer for the survey for the exit.

If you would like to have a chat about your project and how bridging could help then please give me a call or drop me a dm…

Precise have expanded their bridge to term product!

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How does it work?

  • You have one valuation carried out to give you a today figure and a GDV. 
  • You receive two mortgage offers – for the bridge and the term.
  • You have the offer for the term before you start.

For the bridge:

You can borrow 75% LTV to purchase the property

They allow a light refurbishment, including a change of use to an HMO

You have 6 months to move to the term mortgage

For the mortgage:

You can borrow 75% of the GDV figure.

The fees are reduced across both products.

There are very little legal fees to move from bridge to term and it is quick!

What are the benefits?

  • It keeps the costs down of bridging – arrangement fees, legal fees, and valuation fees are reduced
  • It offers certainty over the exit.
  • The process to move from bridge to term is quick and simple.

Jackie’s summary: What a year it’s been!

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Happy Friday everyone… and it does feel like the one way ticket to ending lockdown is really on its way. It’s been a long time coming but finally there’s light at the end of the tunnel!

As we are now starting to get our vaccines and life is about to get back to normal, I though I would reflect on how the business has been for the last year.

Lockdown started on 23rd March and investors were super busy trying to get properties through and start buying new ones, we had a lot more at auction than usual too.  Perhaps having had Brexit for 3 years, followed by the election; COVID wasn’t going to stop you any longer. Usually, during a downturn, property and finance are hit hard; this hasn’t happened during COVID at all.

Apart from the initial valuation issues and lenders pausing lending for a short period, it bounced back very quickly. For those of us who remember previous economic problems, it has taken a lot longer for normality to resume historically so I think this took us a bit by surprise. The days of the last lockdown full of confusion of what we can do seem like a distant memory thank goodness.

What has inspired me through this is just how inspiring our clients are. It’s very easy to batten down the hatches when things get tough, but the courage and energy of our clients really has blown me away.

We have funded everything from the vanilla refinance, through small refurbishments and all the way to full on development – and everything in between. There were challenges with each deal, and it’s been our solid relationships with lenders which has enabled us to deliver on what our clients have needed. Each day brought new lender decisions and criteria so it really was a tricky time!

With all the issues from furloughed staff, lack of seeing and speaking to people, then coping with part time staff around home schooling (of which I helped with), it’s certainly been one of my most challenging years. There have been so many positives though, for example I have never had so many conversations with underwriters and lenders. Perhaps we all needed more than a quick chase up conversation.

As you will know from my previous blog, it has also given me the push I needed to start my own development. As busy as the year has been, I have spent more time listening to people and being mindful of just what we can still learn. Having something else to focus my time in has been really important, and I’ve thoroughly enjoyed it so far – although I’m sure the hard work is to come we haven’t started the development yet!

The lenders have also become so competitive. After the initial drop out of some, so together with the bullish attitude of others, we are able to now offer better deals than ever.  Also, by spending the time in lockdown conversations, we have really benefitted by having sensible discussions that can help with getting a deal across the line or working through getting a better LTV.

Overall, this year has really shown us just how amazing our industry is at bouncing back – both from a lending point of view and investors. We feel so privileged to be part of the industry who have been able to take advantage of this situation which has caused so many problems for so many. I really hope that this year will change the way we view situations too; we are all becoming more understanding of each other’s difficulties and challenges and I hope that we will continue.

There are always winners and losers in tough times.  I really believe that the tenacity of the investor community has shown just how resilient we are.  Onwards and upwards to June 21st and stay safe.

Focus on refinances: The benefits of a valuation pack

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Hi everyone, I hope you’ve all had a good week.  I’m sat today listening to the news regarding regulated mortgages and how the higher loan to value products are being reduced, but it seems the opposite is true in the investment market.  Lender’s are relaxing more into their pre-covid criteria, perhaps because they have always got their 25% buffer available it seems less risky.

This week I want to talk about refinance valuation packs.  This is something that we are asked about regularly, especially when we investors want to maximise the valuation on a refinance!

What is a valuation pack?

When you have finished your refurbishment or conversion, another valuation will carried out on the property and we really want to maximise the value of this to allow you the opportunity to pull as much money out of the property as you want.  The purpose of the pack is to demonstrate the added value on top of the purchase price to the surveyor.

You would want to include topics like:

  • Before pictures, with a description of what the rooms have now become
  • Comparable evidence for the rental values; you can use Spareroom or similar to get this
  • Comparable evidence for the property price using Houseprice.ai or similar; the valuer will always use sold comparables
  • All required certificates for the property, ie electrics, fire safety, gas etc
  • The HMO licence if required and if you have it
  • Full schedule of works with corresponding after works pictures
  • If an HMO, then dress some of the rooms, so the valuer can visualise them.

The packs can be really professionally created and that also helps.  This shows the efforts you are prepared to go to as a landlord.

So why would you create a valuation pack?

It is always tricky when you produce information for a professional. You need to gauge it correctly as you don’t want to be seen to try and tell the surveyor what to say or how to do their job!  Providing evidence, rather than the calculation of how you got the figures themselves can be more useful.

The main advantage of the pack is to show what the property looked like previously, and how you had added value to it, over and above the purchase price and cost of works.  That is where the before pictures are so important, so take lots while you can! The valuer will use the comparable evidence,  but remember that will include your own purchas,e so you need to make sure that they don’t use it!

The pack has a couple of other uses though. They can be used to start putting together a portfolio of your projects; as you start applying for bridging loans and mortgages, lenders need to see your experience and so we can use some of the information in this pack towards that.  You can also use it in part or full to attract investors to your brand for future property purchases.  Creating a brand that people want to invest in is key in today’s market and can open up so many opportunities.

How do you use the pack?

I would always suggest that you meet the valuer at the property for a refinance valuation.  You can help him visualise what you have achieved as well as talk to the surveyor about your type of tenants, demand in the local area and so on.  If they have any questions they can be dealt with straight away which can help the report to come back quickly.  This is also an opportunity to engage with the surveyor and give them your pack.

 

As always, if you have any enquiries then please give us a call.

Stamp duty changes and portfolio drawdowns

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Hi everyone, I can’t believe it’s Friday again – time really does go super quick in a pandemic…..

As you will all know, the Chancellor has given some SDLT help by increasing the threshold to £500k.  It hasn’t removed the fee completely for second properties, but It has significantly lowered the amount needed to be paid.

This really does help, because the new rules will continue through until March 2021.  This will allow investors to take advantage of the downturn, with time to monitor the market rather than rushing into decisions.

So how does that work with lenders regarding capital raisin?

I appreciate this sounds like a cracked record, but lenders are changing their appetite constantly.  As we all know, we as individuals don’t always get the pick of the bunch when it comes to lenders – you and your property dictate your panel and some are restricting capital raising.

There are, however, lenders who will allow you to capital raise and what you as investors need to work out is the cost versus reward – is it worth borrowing in order to look at other opportunities?

Now is the time to look at your existing portfolio, and really look at the opportunities available

  • Do you want to refinance now, or start looking at the options in 6-12 months? What do you think might happen in that time?
  • What could you do as a ‘cash buyer’? Will capital raising and putting yourself in that position help you grow your portfolio?
  • Could you take advantage of the market changes over the next 6 months? Especially with the SDLT holiday until the end of March 2021
  • Could you use this time to diversify your portfolio? Do you think that for example HMOs or serviced accommodation could be more appealing over the next few years and if so, what can you do about it?

As sad as the current situation is, as an investor we must look at the opportunities– and how we can take advantage of those.

Good ground work is key to being in the position to act, or others will!